Research On The Impact Of Market-Oriented Debt-to-Equity Swap On Enterprise Value

With the slowdown of domestic economic growth,the steel industry presents a serious phenomenon of overcapacity,supply and demand imbalance.Caused by the early expansion and debt management of some enterprises,debt burden is not conducive to the long-term operation and development of enterprises,but also seriously affected the pace of China’s industrial economic transformation and upgrading.With the CPC Central Committee repeatedly stressing the five major tasks of supply-side structural reform,the deleveraging of the steel industry has been put on the agenda once again.In2016,the State Council issued guidance on market-oriented debt-for-equity swaps,which proposed the conversion of market-oriented debt-for-equity swaps as an important means of "deleveraging" in the structural reform on the supply side.The emphasis on marketization and legalization is the biggest difference between market-oriented debt-to-equity swap and debt-to-equity swap of 1990 s.The market-oriented debt-to-equity swap requires enterprises to use market-oriented means to negotiate content,and encourages enterprises to promote related work.To achieve the role of improving operation,improving corporate governance,invigorating stock assets and enhancing enterprise value.This paper takes Valin steel’s market-oriented debt-to-equity swap as a case,combined with literature research and case study methods,to answer the question how the market-oriented debt-to-equity swap can bring incremental value to enterprises.By combing the background of the implementation of debt-to-equity swap,this paper introduces the debt to equity swap scheme,analyzes the operation mode of the project and the key mechanism for its smooth implementation,then obtains the driving factors of the value-added of debt-to-equity swap,and analyzes the mechanism of the impact of debt-to-equity swap on its value combined with the specific situation of the case company,and evaluate the impact of debt-to-equity swap from two aspects of market reaction and financial performance.This paper finds that: the driving factors of market-oriented debt-to-equity swap to enterprise value can be seen from the short-term and long-term perspectives respectively.The factors that directly affect enterprise value in the short term are capital structure adjustment,equity injection and asset injection,and the factors that continuously affect enterprise value in the long term are corporate governance,enterprise operation and capital operation.The mechanism of the impact of market-oriented debt-to-equity swapon the value of Valin steel is shown in four aspects: First,the optimization of capital structure to improve enterprise performance;Second,the creation of synergy effect by asset restructuring of related parties;Third,the adjustment of governance structure brings into play the effect of governance;Fourth,the overall market of steel assets to promote sustainable development.Finally,based on the results of event research and financial index analysis,it is concluded that after the completion of the market-oriented debt-for-equity swap,valin iron and steel will obtain a positive excess yield for most of the time which creates value for the enterprise in the short term;At the same time,all financial indicators of the enterprise are steadily improving,the future profitability and development ability will be further improved,and the enterprise value will also be improved.The market-oriented debt-to-equity swap has achieved the expected effect.This study is of great significance for enriching the research perspective of the impact of market-oriented debt-to-equity swap on enterprise value,and for the next step to expand the operation mode of debt-to-equity swap and promote the practical experience of debt-to-equity swap,so as to provide reference for more local state-owned enterprises to smoothly implement it.