Case Study On Market-oriented Debt To Equity Swap Of Nanjing Steel Under The Background Of Supply Side Reform

In the new era,China’s economy has entered a brand new normal of rising quality and efficiency.However,in recent years,the leverage ratio of China’s real economy sector remains high,and there are hidden worries about the high-quality development of the national economy.Behind the high leverage ratio is the increase of financial and operational risks of enterprise departments.The task of deleveraging China’s real economy is imminent.In this context,China officially put forward the term "supply side reform" in 2015,which laid the general tone of the "three going,one reducing and one compensating" work in the future.As supply-side reforms continue to deepen and advance,on October 10,2016,the State Council issued "Guidance on the Transfer of Debt to Equity in Marketable Banks." This document is mainly formulated to resolve enterprise debt risks,promote supply side reform and reduce enterprise leverage.At this point,the market-oriented debt to equity swap curtain officially opened.Unlike the policy debt to equity swaps implemented in the1990 s,this one places a lot of emphasis on the dominance of the market and the law,with more institutions participating in the wave of market-oriented debt to equity swap reforms.In the current round of market-oriented debt to equity swap process,as the first private enterprise to implement,the successful case of Nanjing Steel.is very representative.In view of the nature of private enterprises and the importance of private enterprises,the significance it represents is also extraordinary.Therefore,this paper selects Nanjing Steel as the case company.This paper firstly composes the domestic and foreign literature and typical theories related to debt to equity swaps,and establishes the research content and framework of this paper in turn;secondly,this paper introduces the profile of Nanjing Steel,including the policy background and implementation plan.And then,this paper focuses on its case analysis.Through the analysis of the macro,meso and micro motivation of debt to equity swap,this paper analyzes the motivation of debt to equity swap,so analyzes the rationality of debt to equity swap and its economic impact on enterprise worth,financial and operational risks.Finally,based on the above,this paper summarizes the conclusions and suggestions,objectively evaluates the shortcomings of this paper and looks forward to the future.The paper puts forward three conclusions: Firstly,the market-oriented debt to equity swap is beneficial to mitigate the operational risks of the target.After the completion of the debt to equity swap,Nanjing Steel’s company governance,internal control and R & D capability have been improved,which is conducive to the long-term and sustainable operation of the company.Secondly,the market-oriented debt to equity swap is tributary to reducing the financial risks of the target.After debt to equity swap,Nanjing Steel’s solvency,operational capacity and profitability have all been improved to completely different degrees,and its financial risks have been reduced.Thirdly,the market-oriented debt to equity swap is tributary to the implementation of enterprise value.Comparing the Tobin Q value with the industry average before and after Nanjing Steel implemented market-oriented debt to equity swap,it is found that the Tobin Q value rises significantly after debt to equity swap,indicating that debt to equity swap can indeed improve enterprise value.This paper hopes to enrich the existing literature by analyzing the case of Nanjing Steel marketable debt to equity swap,provide feasible reference for other enterprises planning to implement marketable debt to equity swap,and make corresponding contributions to supply-side reform and reduce the real economic leverage ratio.