Research On Causes And Risk Prevention Of AAA State-Owned Enterprise Bond Default

The bond market is an important part of financial market.With the continuous development of the bond market in recent years,credit risks have been accumulating and breaking out.The number of bond default events in China has gradually increased,and the default subjects have expanded from private enterprises to state-owned enterprises.From October to December 2020,state-owned enterprise defaults occurred frequently,large-scale and high-rated state-owned enterprise bonds such as Brilliance Group,Yongcheng Group,Ziguang Group defaulted collectively.Investors in the credit bond market had a decline in risk appetite.The negative expectations cast a shadow over the market.Based on this background,the paper selects the substantive default case of Yongcheng Group’s AAA-rated bonds to research,which had a significant impact on the bond market on November 10,2020.Firstly,based on soft budget constraints,principal-agent and information asymmetry theories,this paper sorts out domestic and foreign literatures on the influencing factors of bond default and risk prevention.Secondly,paper introduces the current situation of China’s credit bond default market from the perspectives of industry,region and enterprise nature.In view of the increasing number of default subjects of state-owned enterprises,this paper focuses on the of bond default trends of state-owned enterprises.Next,by sorting out the default process of Yongcheng,the paper explore the reasons of bond default from four perspectives:macro,industry,social intermediary and company.Finally,this paper proposes prevention from the perspectives of bond issuers,social intermediaries,investors and supervision,in order to reduce bond default risks and promote the healthy development of the bond market.Through the research of the case of Yongcheng Group’s bond default,this paper obtain the following causes for the default:(1)From internal reasons,the profit of the non-coal sector fell sharply.The management structure that the parent company is weak but its subsidiaries are strong led to pressure on profitability.The company’s interest-bearing debt is too high and debt structure is short-term.Besides,related parties occupy funds and the liquidity is tight.The above reasons of company perspective are the internal direct causes for bond default.(2)From external reasons,the enterprise is facing macro pressures such as the tightening of the financing environment,and the implicit guarantee of the local government is invalid.The industry in which the company operates is regulated by the epidemic and environmental protection policies,so its business activities are restricted.Besides,Social intermediaries have not played their due risk assessment and supervision role in the default of Yongcheng’s bonds,and the credit rating agencies have the problem of rating bubbles and early warning lag.Therefore,this paper puts forward the following countermeasures to prevent bond defaults:(1)Optimize the development strategy,debt structure and alert settings to reduce the credit risk of the group.(2)Improve the credit rating methods,especially for group-type enterprises and specific industries,strengthen the compliance of the underwriting process in order to reduce conflicts of interest.(3)Improve the risk awareness of investors and break the halo effect of state-owned enterprises’bonds.(4)Improve the issuer’s information disclosure system,enhance the supervision of intermediaries by the regulatory authorities,and improve the market-based disposal mechanism for bond defaults.