Research On The Motivation And Effect Of Debt To Equity Swap In China Railway

With China’s economy taking on a new look,the huge amount of money allocated by the government to deal with the financial crisis has entered the digestion period,so as to achieve positive economic growth.But the problems are also increasingly apparent: some traditional manufacturing,long-term industries and other debt ratio is unreasonable,high risk,restricting the further development of the economy.At the same time,the bank’s non-performing asset rate is too high,bad debts,bad debts and default occur from time to time,which together aggravate the financial risk of the market.In order to prevent financial risks in time,maintain market stability,help enterprises reduce their burden and stimulate their development vitality,China started a new round of debt to equity swap in 2016.In this context,this paper selscts China Railway’s debt to equity swap as the research objict.Firstly,through the analysis of the whole process of mutual selsction.specific steps,pricing mechanism and exit channels,this paper summarizes thecharacteristics of the scheme:the selsection of China Railway’s debt to equity swap scheme is highly consistent with the actual situation of China Railway,which can quickly achieve the ourpose of reducing leverage,However,there are some deficiencies in the pricing mechanism and the protection of the interests of investment institutions.Secondly,from the policy,industry and other external environment,combined with the enterprise’s own business situation,this paper deeply excavates the motivation of China Railway,and analyzes the impact of debt to equity swap on China Railway from four aspects of income level,risk degree,internal value and corporate governance.Finally,according to the problems in the above research and the areas that need to be improved,this paper offer proposals: for one thing,we should give full play to the role of the market,reduce the financial pressure by introducing more social capital,and weaken its administrative color;for another,we should smooth the equity exit channel,such as signing a bottoming out agreement,directional repurchase,so as to protect the interests of investment institutions At the same time,enterprises should also take a correct view of the role of debt to equity swap,instead of taking debt to equity swap as the only means to optimize the financing structure,they can also combine off balance sheet financing,asset securitization and other measures;in addition,enterprises should also strengthen the supervision of internal risks after debt to equity swap,give full play to the role of risk management committee,and form a long-term mechanism.Partly,the research on its debt to equity swap scheme,motivation and effect can reflect the common problems of other enterprises in the market.This can help enterprises choose to carry out engagement to equity swap in the future when selecting investment institutions and formulating debt to equity swap scheme.