Study On Relationship Between Over-investment And Debt Default Of YT Energy Company

With the strong introduction of the new regulations on de-leverage,de-channel and de-chain in the national financial system in 2017,the refinancing channels of enterprises have been tightened.Under the strict financial supervision environment,the debt default incidents of private enterprises occurred frequently in 2018,and the storm of default even swept over the private listed companies.However,in the early financing loose environment,over-investment,over-borrowing,blind cross-border and so on.It is the common characteristic of these defaulting enterprises,and some star enterprises in the industry are facing the dilemma of delisting and bankruptcy because of huge debt default,which has aroused wide attention and discussion of experts from all walks of life.Enterprises can raise funds through financing convenience and enlargement effect in capital market so as to achieve their various strategic objectives.However,if enterprises continue to make excessive debt investment in the course of their expansion,at the same time,such excessive investment can’t enhance their profitability,bring sustained considerable cash flow to enterprises,and fill the fund gap caused by enterprise expansion.If so,it will lead to the continuous decline of its debt repayment capacity,and then increase the risk of default.This paper chooses YT energy company as the case study object,and studies the development process and causes of YT energy company debt default by using the methods of literature research,case study and comparative analysis.It is found that YT energy company has the problem of over-investment in the process of transformation and expansion,and over-investment causes the weakening of the solvency of enterprises from the two aspects of radical debt financing and low return on investment,which eventually leads to a huge debt default.This paper is guided by principal-agent theory,information asymmetry theory,managerial overconfidence theory,enterprise growth theory and financing constraint theory,and based on the financial data and business information of the case company.This paper combs the main investmentactivities of YT energy company,and divides the investment process into stages.It expounds the investment strategy,scale,time point,mode and the change of capital sources in each stage,and analyses the evolution process of its over-investment.It also explores the changing process of the solvency of enterprises in the process of over-investment and its relationship with over-investment.It mainly analyses the influence of over-investment on debt default from the two paths that excessive investment leads to radical debt financing of enterprises and investment income gap leads to further increase of debt burden of enterprises.On this basis,this paper further explores the reasons for the out-of-control of investment and financing of case companies,mainly from three aspects: weak internal governance balances and manager’s self-interest behaviors,managers’ overconfidence and strategic choices,and the periodicity of industrial environment and policy impact.Finally,the paper summarizes the research and puts forward relevant suggestions,as well as the limitations of the research and prospects for future research.The main contribution of this paper is to select typical sample of private enterprises,to explore the causes and development paths of debt default from the perspective of the relationship between investment and financing within enterprises,and to further explore the financial strategy choice and corporate governance of private enterprises.It not only contributes to the study of the economic consequences of supplementary overinvestment,but also provides a new perspective for the study of factors affecting corporate debt default,and also provides a reference for the healthy development of private enterprises.