Research On The Effect Of Market-oriented Debt-to-equity Swap Of Valin Steel On Firm Performance

The impact of financial crisis in 2008 continues to spread.In order to ease the stagnant economic situation,China introduced the "Four trillion" fiscal policy,which led to high leverage enterprises ratio and economic downturn.In addition,under the background of overcapacity and unstable supply and demand in the iron and steel industry,In 2016,the document "Guidance on Market-oriented Bank Debt-to-Equity Conversion" issued by State Council raised a new round of market-oriented debt-for-equity boom.The new document featured with marketization,which was different from when government played a leading role in order to deal with bad bank account for the purpose of debt-for-equity,whose ultimate goal is leverage reduction and more important,to optimize the governance structure,improve the enterprise performance.This paper takes Hunan Valin Steel Co.,Ltd.(hereinafter referred to as "Valin Steel")as the research object.this paper presents current situation of steel industry as well as basic condition of enterprises,and analyzes the main reasons for the implementation of market-oriented debt-to-equity swap from the aspects of the characteristics of the industry,the management of the company,the national policy and the self-development,etc.,the paper also introduces the current situation of market-oriented debt-to-equity swap of Valin steel from the aspects of innovative operation mode,market-oriented pricing and withdrawal mechanism.Finally,it analyzes the impact of market-oriented debt-to-equity swap on the performance of enterprises,using the methods of financial performance analysis,event study analysis,free cash flow forecasting.Based on the above research,it can be concluded that marketing Debt for Equity Swap cant solve the problem of high debt fullly,but also improve the profitability and enterprise value of enterprises.However,due to the lack of policy documents,rules and regulations,the short-term market reaction ability of market-oriented debt-equity swap is not good.Therefore,this paper believes that under the necessary conditions of adhering to the principle of marketization,it is necessary to choose a suitable debt-to-equity model;Perfect equity exit channel;And enterprises need to strengthen the sustainable development capacity of debt-to-equity enterprises.Hopefully,this research can offer illumination for subsequent enterprises engaged in implementation of market-oriented debt-equity swaps.