A Study On Causes And Countermeasures Of Financial Distress In NJTC

The phenomenon of soft budget constraint in enterprises has attracted by scholars for a long time.Janos Kornai initially attributed soft budget constraints to ownership.However,the theory can't make a reasonable explanation for the widespread phenomenon of soft budget constraint in some reformed state-owned enterprises and private enterprises.After that,Lin Yifu introduced the concept of policy burden.It holds that some enterprises that undertake the circumstances of national strategic development and social public functions,often make business decisions not entirely out of the consideration of maximizing their own operating efficiency,and may bear the policy losses.However,under the case of information asymmetry,the government can't accurately distinguish between the policy losses and operating losses of enterprises,so it has to subsidize all the losses.According to Lin Yifu's view,while enterprises still undertake the policy burden,the government's relief is just a temporary solution,which means the complete reversal of the financial difficulties of enterprises depends on the reduction of the policy burden.On the basis of previous research,this paper analyzes the dynamic relationship between the policy burden and the financial predicament of NJTC,which has the name of "the first stock of the state-owned enterprises de-listing" and "the first stock of relisting",by using the theory of budgetary soft constraint and "supporting hand" & "predatory hand" and the method of case study.This paper mainly includes two parts: the theoretical analysis and the case analysis.In the theoretical analysis part,this paper summarizes the literature of the relationship between policy burden and financial distress of enterprise and the government intervention in financial distress enterprise.On the basis of theoretical analysis,this paper takes NJTC as an example,analyzing the institutional causes of the financial distress and the role of government intervention in the process of getting rid of the financial distress,and naturalizes the dynamic relationship between policy burden and the financial distress of enterprises.This paper finds that there is a dynamic relationship between the policy burden and financial distress.First of all,the financial distress of NJTC is related to the policy burden from "national oil transport" policy.Secondly,the local government and SASAC played an important role helping NJTC get rid of financial distress,including in the coordination of off-balanced-sheet liability and treatment of off-balanced-sheet liability respectively,which reflects the soft budget constraint.Moreover,with the support of the government,NJTC has great reduce in policy burden and gets rid of financial distress completely.The possible contributions of this paper are as follows.First of all,this paper finds that the strategic burden will worsen the financial performance of enterprises,which expand the study of the political motivations of the financial distress of enterprises.Secondly,this paper finds that the government may have implicit intervention in some enterprises,which fall into financial distress.Moreover,this paper depict the dynamic relationship between the policy burden and the financial distress of the enterprise,which can be of some helps to understand the interaction between the government and the enterprise in the transition economy.Finally,the research of this paper has some suggestions for enterprises to get rid of financial distress and SOE reform.