Analysis Of Leverage And Its Change In Iron And Steel Enterprises Under Supply-side Reform

Since 2012,China's steel industry supply has experienced serious structural imbalances.As one of the pillars of China's real economy,steel companies have suffered large losses,and their operational risks and financial risks are high.The steel industry has entered the most difficult period in 20 years.In Jan.2016,China clarified the five tasks “Deleverage,De-capacity,Destock,Cost Reduction and Strengthen Weak Point” of supply-side reform which could assist the transformation of energy enterprises.In a future time,the supply-side reform influences the operation and development of the iron and steel enterprises to a large extent.So far,the supply-side reform has been implemented for three years.State-owned steel companies and private steel companies have made all efforts to reduce the business risks and financial risks of enterprises.The overall recovery of the industry is obvious,and production capacity and inventory are strictly controlled.Borrowing costs have fallen significantly,and operating leverage and financial leverage have fallen to a reasonable level.However,the property rights,asset size and management mode of state-owned enterprises and private enterprises are different.Is there any difference in the changes in operating leverage and financial leverage after the supply-side reform is implemented?On the basis of studying the background and meaning of supply-side reform and the influence of supply-side reform on operational leverage and financial leverage,this paper briefly describes the theory of supply and demand equilibrium,resource optimization allocation theory and trade-off theory.By taking the stated-owned Anshan Iron and Steel Group Corporation and privately operated Shagang Co.Ltd as cases,the paper respectively analyzes the variation of operating leverage and financial leverage before and after implementing the supply-side reform 6 years.Then,the operating leverage and financial leverage of Angang Steel and Shagang are compared horizontally to analyze whether there is a difference,commonality and possible reasons for the impact of supply-side reform on state-owned and private steel enterprises.The average of 38 steel listed companies is used as the industry.The average value is a detailed analysis of the asset structure,operating leverage,capital structure,financial leverage,pre-tax profit margin and equity net interest rate of the two steel companies.We figure that the EBIT margin and net interest margin of Anshan Iron and Steel Group Corporation and Shagang Co.Ltd gain the large increase,the operating leverage degree regresses to the rational level and the financial risk declines obviously.After implementing the supply-side reform,for the aspect of debt financing,the Shagang Co.Ltd confronts some deficiencies,the financial leverage factor is near to 1 and financial leverage seldom generates the effects which are the common problem for difficult financing of private enterprises.However,as for the profitability,Shagang Co.Ltd performs better than Anshan Iron and Steel Group Corporation.What's more,it is about the common problems for Anshan Iron and Steel Group Corporation and Shagang Co.Ltd to push forward the supply-side reform such as unreasonable asset structure,unreasonable capital structure,low asset liability ratio and so forth.Finally,from the micro-level and macro-level,the paper also puts forward the related strategies and suggestions so as to provide the references for other iron and steel enterprises to enlarge advantages,improve deficiencies,continually drive supply-side reform and improve the enterprise value.