A Case Study Of The Reason Of Bond Default Of Chaori And The Disposition Effect

The United States is the birthplace of the bond market.In the market, corporate bonds default several times.During the three hundred years of development,massive bonds default erupted three times.The western theory circle think that financial crisis is that the company failed to fulfill its promises to creditors.Scholars at home and abroad do a lot of research about the reason and prediction for financial crisis,risk management,bankruptcy problem.But,in China, the begining of bond market is rather later than the Western.In the past thirty years,there is no really default.Though there has several companies on the verge of default, local governments guarantee their debts.It is a non normal phenomenon in the free market economy.Based on the comprehensive research achievements made by scholars at home and abroad about the theory of financial crisis, strategies after the beginning of financial crisis, we around this thread of “Chao ri” bonds default. And then this paper concentrates on the reason of default, the disposal process after default and economic consequences.Research found that photovoltaic industry has massive excess capacity and western’s recent economic downturn are the causes of the industry.Financial reasons are that over-extended and excessive indebtedness lead to lose access to liquidity.Large shareholders use privilege to enforce over investments and transfer funds,which lead to minority shareholders’ interest damaged.The last reason is regulatory system is not perfect. Strategy after the beginning of financial crisis is bankruptcy restructuring. This is the results of multi-player game.Economic consequences are that shareholders being punished and economic performance of the new company improved.The end result of “Chao ri” bonds default is that Large company in the photovoltaic industry merger Chao ri company.During the processes of default,local government guarantee Indirectly. Though there has the power to improve present situation compared to the past,local government intervention continued.It makes against development of capital market and heightening awareness of the risks.Last,this paper obtain some revelation form this case from three aspects.