Study On The Effect Of The Marketization Of Debt-to-Equity Swap In Private Enterprises

The concept of "debt-to-equity " in China first come into existence in 1999.At that time,in order to reduce the bad debt ratio of commercial banks,the government adopted the way of debt-for-equity swap,which was "arranged" by the government,so that the bad debts of banks could be reactivated.However,the statute of limitations was short and it basically centered on state-owned enterprises,which could not fundamentally achieve the effect of deleveraging for enterprises.According to the data released by the National Academy of Social Sciences in July 2015,the leverage ratio of Chinese non-financial enterprises reached 149.1% at the end of 2014,which indicates that Chinese enterprises have low efficiency in using funds and heavy burdens.Against this background,debt-to-equity swaps appeared again in October2016 in order to combine with the national target of "three elimination,one reduction and one subsidy".However,the new round of debt-to-equity swaps is quite different from the first round of debt-to-equity swaps.The debt-to-equity swap adheres to the market-oriented principle and takes it as a measure to reduce its debt level and thus promote its transformation and upgrading.Moreover,the main body of implementation is no longer limited to state-owned enterprises,but also encourages private enterprises.Now,majority of the existing documents studies stay in the qualitative perspective,and rarely analyze the specific programs and influencing factors of debt-to-equity swaps.Moreover,most of the literature focuses on the debt-to-equity swaps of state-owned enterprises,and rarely analyzes the effect of implementation from the perspective of private enterprises.Based on this,this paper adopts the method of case analysis and selects the case of Oriental Garden in the debt-to-equity swap of private enterprises for analysis.The company carried out market-oriented debt-to-equity swap in November 2018,and the information disclosure is relatively perfect,which has played a good demonstration effect among private enterprises.Therefore,Oriental Garden is taken as the research object.This paper mainly analyzes the current situation of private enterprises,the motivation for the implementation of Oriental Garden,short-term market reaction,financial performance evaluation,non-financial performance evaluation and other aspects,and finds that market-based debt-to-equity swap can alleviate the phenomenon of rising asset-liability ratio to some extent,alleviate the temporary financial crisis,and have a good short-term reaction in the market,which can store strength for the subsequent development.However,in general,in order to maximize the effectiveness of debt-to-equity swap,attention should be paid to the management and planning after implementation and the subsequent long-term development.In addition,in order to promote the successful implementation of debt-to-equity swap project of private enterprises,enterprises should constantly strengthen their core competitiveness,increase the disclosure of information,and the government should constantly improve the market order.Private enterprises will be allowed to play a bigger role in the market-based debt-equity swap process.