Research On The Effect Of Market-oriented Debt-to-equity Swaps In Inner Mongolia Baotou Steel Union Co.,Ltd.

Since 2008,China's leverage ratio has risen sharply,especially in the non-financial corporate sector.On October 10,2016,the National Development and Reform Commission issued the Opinions of the State Council on Actively and Steadily Reducing the Leverage Ratio of Enterprises,which clarified the general requirements and main measures to reduce the leverage ratio of enterprises and promoted the implementation of market-based debt-to-equity swaps in relevant industries to promote supply-side structural reform.Since the promulgation of the relevant documents,heavy industrial enterprises with high leverage and facing difficulties in production and operation have started to implement market-based debt-to-equity swaps one after another.At present,26 industries such as coal,steel and non-ferrous metals have joined the army of market-oriented debt-to-equity conversion,but the enterprises implementing debt-to-equity conversion are mainly gathered in the coal and steel industries.Bao Gang United Steel started to implement market-based debt-to-equity conversion in 2018,so what is the goal of this implementation of debt-to-equity conversion in Bao Gang United Steel? How is its specific implementation plan designed? What is the effect of the implementation,and does it achieve the initial goal? How to better avoid the risks that may be faced in the implementation?All these questions are worthy of in-depth study.This paper adopts the case study method to study Bao Gang United Steel,analyzes the scheme of market-based debt-to-equity conversion plan,the motivation and implementation effect of Bao Gang United Steel,and puts forward reasonable suggestions for the possible risks in the implementation process,so as to provide useful reference for other enterprises to implement market-based debt-to-equity conversion in the future.This paper firstly reviews the literature on the motivations,models,impacts and risks of market-based debt-to-equity swaps;then reviews the development history of debt-to-equity conversion in China,and summarizes the characteristics of market-based debt-to-equity conversion by comparing the relevant policies of two rounds of debt-to-equity conversion;then introduces the overall situation of this market-based debt-to-equity conversion of Bao Gang United Steel,and specifically analyzes the implementation plan and motivation;finally,focuses on the analysis of the market-based debt-to-equity conversion of Bao Gang United Steel.Finally,paper analyze the effect of the market-based debt-to-equity conversion of Bao Gang United Steel: first,we evaluate the market reaction to the debt-to-equity conversion program through the event study method,and we find that the market reaction to the implementation of the market-based debt-to-equity conversion is positive,which indicates that the market is optimistic about the debt-to-equity conversion;second,we find that the company's financing ability has been improved after the implementation of the market-based debt-to-equity conversion from the analysis of the capital structure;third,in terms of corporate governance structure,the implementation of market-based debt-to-equity conversion has had a positive impact on the company's shareholding structure and internal governance;fourth,In terms of financial performance,the debt-to-equity conversion will have an obvious positive impact on the company's solvency,and the reduction of interest income will also have a positive effect on the company's profit improvement,which is beneficial to the long-term development of the company;finally,the possible risks faced in the implementation of market-based debt-to-equity conversion are proposed.Lastly,reliable recommendations for avoiding possible risks in the implementation of market-based debt-to-equity swaps.This paper analyzes the impact mechanism of market-based debt-to-equity conversion by using existing theories,and discusses the impact of market-based debt-to-equity conversion on the capital structure and governance structure of enterprises,providing a theoretical basis for further implementation of market-based debt-to-equity conversion;at the same time,provide useful reference for the subsequent implementation of market-based debt-to-equity swaps for other steel enterprises.