The Research On The Influencing Factors And Economic Conseauences Of Bond Default Case Study Based On Brilliance Auto

With the constant development of China’s bond market,the bonds are issued on an increasingly large scale,while bond defaults occur more frequently and regularly than before.Since the bond 112061 was defaulted in 2014,which was the first case of corporate bond default in China,Chinese corporations have frequently defaulted on bonds,with the sum of money involved continued to rise.Private enterprises are especially prone to bond defaults.In 2020,impacted by factors such as COVID-19 epidemic,China’s state-owned enterprises(SOEs)which enjoy high-grade bond rating defaulted on bonds more than ever.As a result,the belief that SOEs cannot default on bonds is weakened.On the one hand,bond defaults that occur more and more severely impair the healthy development of China’s bond market.On the other hand,bond default is an inevitable phenomenon in the development of bond market.The bond defaults on a proper scale can help promote the bond market resume the practice of risk pricing and improve the credit rating system.They represent a severe test that China’s bond market must undergo in its process of development.Taking the bond default in Brilliance Auto Group as an example,the paper summarizes the present situation and characteristics of bond defaults in China’s companies.Based on the summarization,it gives a detailed analysis of the factors that lead to bond defaults and the economic consequences thereof from the perspective of listed SOEs.The paper first introduces the relevant domestic and international research findings in the field of bond default,as well as incomplete contracting theory,principal-agent theory and optimum capital structure theory.Next,it introduces the development and the defaults of China’s bond market over the past years,and systematically generalizes the characteristics of bond defaults in China’s companies from five aspects-the number of defaults,the sum of money involved,the types of bonds,the nature of enterprises,the industrial distribution and the geographical distribution of enterprises.In analyzing the case of bond default in Brilliance Auto Group,the paper briefly introduces the basic information of Brilliance Auto Group and the process of the bond default,then it focuses on analyzing the reasons of the bond default and its economic consequences.The research findings demonstrate that the bond default was caused by multiple factors of both the macro environment and Brilliance Auto Group.The factors of Brilliance Auto Group,such as the characteristic that "the parent company is weaker than its subsidiaries" and the unreasonable capital structure mainly accounted for the occurrence of the bond default.In addition,the bond default brought certain economic consequences on the internal structure of Brilliance Auto Group and the bond market.For Brilliance Auto Group,the bond default resulted in the company’s reorganization and the lowering of the company’s credit rating;for the bond market,the consequences of the bond default were mainly manifested as the continued transmission of default risk.Based on the research findings on the bond default of Brilliance Auto Group and in light of the present situation and characteristics of China’s bond market,the paper puts forward suggestions on addressing the phenomenon of bond default from the perspectives of government departments,credit rating agencies,bond issuing companies and investors.The research findings provide theoretical references to subsequent research in relevant fields.They are also of important significance for preventing and defusing the risks of bond default and promoting the healthy and thriving development of China’s bond market.