Performance Research On The Bankruptcy Reorganization Of Risk Warning Listed Company

In China,A-share listed companies that have lost money for two consecutive years will be issued delisting risk warnings,with "*ST" in front of their names to distinguish them from other companies’ stocks.Since the implementation of the new Enterprise Bankruptcy Law on June 1,2007,the number of bankruptcy reorganization cases accepted by China’s courts has been increasing year by year.Bankruptcy reorganization has become an important way for listed companies in China to get out of trouble and survive.In this paper,we select the case of Salt Lake Corporation,which has just resumed listing in August 2021,and study the successful completion of bankruptcy restructuring.The article introduces the reasons and process of its bankruptcy reorganization and evaluates its reorganization performance.The paper hopes to summarize its successful experience as a reference for other listed companies facing bankruptcy.Salt Lake is the largest producer of potassium chloride in China,accounting for 64% of the national production capacity.However,due to the company’s excessive investment in magnesium metal and other projects,declining product prices and poor management,the net profit attributable to Salt Lake began to decline precipitously from 2017.In September 2019,the court accepted Salt Lake’s bankruptcy reorganization application,and completed the bankruptcy reorganization process in only four months.This restructuring has achieved significant results on both the asset side and the debt side.This paper focuses on the evaluation of the performance of the reorganization results.In terms of market performance,this paper uses the event study method to find that the bankruptcy reorganization results in a significantly positive average excess return on the company’s stock.In terms of financial performance,this paper uses principal component analysis to downscale eight financial indicators of the company and calculate the overall performance scores,and finds that the company’s financial position has been deteriorating since 2012,while the bankruptcy restructuring has significantly improved the company’s financial position.Finally,the article summarizes a series of suggestions for those listed companies preparing for bankruptcy reorganization: they should retain core-operating assets and enhance their core competitiveness;the reorganization process should pay attention to the protection of creditors’ interests;bankruptcy reorganization should follow the law of market development.Salt Lake Co.,Ltd.should take the reorganization as an opportunity to increase R&D investment in the potassium and lithium industry.Several financial institutions have become shareholders of the company after the share conversion,thus,the company should strengthen stable communication with these shareholders,and finally choose a reasonable stock-for-debt exit mechanism to avoid adverse effects on the company’s shareholders’ rights and interests.