A Research On The Influence Of "Two-Step" Market-Oriented Debt-to-Equity Swap On Enterprise Value

Recently,China’s real enterprises has behaved weak in its profitability,and the financial leverage has risen,posing a threat to the smooth operation of the economy.In this context,a new round of debt-equity swaps started.It has prominent marketization features,among which the "two-step" mode is very prominent,which is the introduction of implementing institutions to make subsidiaries carry out debt-equity swap,and then parent company issues shares in order to buy the equity of subsidiaries to realize institutional exit.At present,some enterprises through the implementation of the "two-step" mode of market-oriented debt-equity swap,help enterprises to cope with their financial risks,optimize the corporate governance structure,make the operating situation better,thus enhance the value of enterprises.This thesis aims to study the effects that this mode can bring to enterprise value,and figures out the routines separately.This thesis takes Valin Steel as a case study subject to analyze the impact of the "two-step" mode on enterprise value.The introduction part first shows the research ’s background and its significance,then make a review of the literature related,introduces the research ideas and methods,then the thesis’ possible innovative points and defects.The first chapter puts forward the definition of market-oriented debt-equity swap and enterprise value,compares market-oriented debt-equity swap with policy-based debt-equity swap,and explains theories which this thesis bases on.Chapter two introduces the participants,background and implementation plan of Valin Iron and Steels "two-step" market-oriented debt-equity swap project.In the third chapter,it firstly figures out the factors that has an impact on the increase of enterprise value throughout Valin Steel’s debt-equity swap both in the short-term and long-term.Thus it explains the mechanism that the two steps of Valin Steel’s market-oriented debt-equity swap affect the enterprise value,and analyzes the effects in financial performance and market reaction on the enterprise value.Each step of the "two-step" market-oriented debt-equity swap improves the company’s solvency;Overall profitability is improved,but the issuance of shares to purchase assets leads to short-term diluted immediate returns;The operating capacity of the company has been improved through both implementation steps,but the company still need to improve its operating efficiency.The development ability of the enterprise is enhanced through the first step.The second step improves the operating income of the enterprise,but the profit growth ability is greatly limited.It shows that the introduction of diversified shareholders does not produce obvious governance benefits.The overall market response has been positive,making companies produce more value in the short term.As a conclusion,the "two-step" mode market-oriented debt-equity swap improves the enterprise value as expected.In the end,this thesis summarizes the conclusions of the research.It can provide subsidiaries which are not listed with listed parent companies a new way.In order to make market-oriented debt-equity swaps play a better role,three suggestions are put forward:focus on long-term mechanism,strengthen risk management of all parties involved and make related policies better.This thesis provides references for enterprises with high leverage and low profitability that meet the implementation conditions,and has a positive impact on helping enterprises achieve sustainable development,improving the landing rate of market-oriented debt-equity swap projects,and even accelerating supply-side reform.