Research On The Motivation And Implementation Effect Of Market-based Debt-to-Equity Conversion In Xingfa Group

Against the background of economic growth slowdown and industrial structure transformation and upgrading,the pressure on the real economy has increased,and some enterprises are operating in difficulties with high leverage ratio.In order to enhance the endogenous growth momentum of the economy,reduce the pressure on enterprises’ debts and ensure their healthy and orderly development,the state has introduced several policies and measures for market-based debt-to-equity swaps,and many highly indebted enterprises have actively responded to the policy call and signed relevant investment agreements with institutional investors.Since the implementation of the new round of debt-to-equity swap,it has effectively reduced the leverage ratio of enterprises,reduced the non-performing assets of banks,and provided an effective boost to China’s supply-side reform.This paper adopts the case study method,taking Xingfa Group as the research object,and on the basis of combing the literature and theories of market-based debt-to-equity conversion,it provides an in-depth analysis of its implementation of market-based debt-toequity conversion.Firstly,the basic information of the participants,transaction process and exit mechanism are elaborated,secondly,the motivation of this debt-to-equity conversion is analyzed from two perspectives of internal and external factors,then the implementation effect is analyzed from four perspectives of market response,financial index,governance structure and financial risk,and the problems arising from the debt-to-equity conversion are summarized,and finally this paper gives some suggestions for optimization.Through this paper,the following conclusions are drawn:(1)for Xingfa Group and its subsidiary Hubei Taisheng,the implementation of this debt-to-equity conversion directly reduces the leverage ratio,optimizes the asset structure and reduces the financial risk,which is in line with the long-term development interests of the company;(2)there are limitations in the implementation of this market-based debt-to-equity conversion,the short-term market response is not good,and the effect on the company’s profitability and operating capacity is limited;(3)Xingfa’s debt-to-equity conversion has a limited effect on the company’s profitability and operating capacity;(4)Xingfa’s debt-to-equity conversion has a limited effect on the company’s profitability.(3)The market-based debt-to-equity swap implemented by Xingfa Group has the advantages of fast timeliness,guaranteed exit and compliance with operational requirements,but it also has the disadvantages of treating the symptoms but not the root cause,lack of debt financing constraints and inability to maintain the sustainability of the governance effect.This paper draws the following suggestions for the future marketoriented debt-to-equity market: firstly,the economic development of the country and the industry and the enterprises’ own operating conditions should be taken into account comprehensively to open up diversified financing channels;secondly,the enterprises implementing market-oriented debt-to-equity conversion should establish a long-term mechanism to reduce leverage;thirdly,the investment institutions should focus on improving the debt restraint mechanism at a later stage;fourthly,the regulators should improve the market-oriented debt-to-equity conversion system.