Research On Reasons Of Bond Default And Early Warning Of Brilliance Auto

With a number of bond defaults exploding in China’s bond market after 2018,with huge amounts of defaults and great losses to investors,it is significant to conduct research on early warning of bond defaults.Therefore,it is important to analyze the business and financial conditions of enterprises,identify their problems,identify key factors,find predictive indicators,and build an early warning system to help investors effectively prevent the risk of bond default and reduce the benefit loss caused by bond default.This paper takes Brilliance Group,a large state-owned enterprise in Liaoning Province,as the research object and analyzes the causes of Brilliance Group’s bond default based on the existing research on the factors influencing bond default.This paper analyzes the information on the company’s main business,equity structure,and debt issuance,compares and analyzes the bond default process and subsequent situation of Brilliance Group according to time points,and comprehensively analyzes the causes of Brilliance Group’s bond default from the outside to the inside.On the one hand,it is the influence of external factors such as the downturn of the auto industry,credit rating,information disclosure,and unsoundness of regulators,and on the other hand,it is the internal reasons such as over-reliance on joint venture brands,high leverage expansion operation and aggressive investment strategy.Based on an in-depth analysis of the causes of Brilliance Group’s bond default,we try to build a bond default early warning system,select financial indicators with strong sensitivity,select data from Brilliance Group’s publicly disclosed financial statements for the past twelve years,analyze its financial ratios indicators such as profitability and solvency,establish a bond default early warning model based on factor analysis with the help of SPSS software,consider non-financial indicators such as industry characteristics,corporate strategy,and corporate governance,and validate the early warning model with relevant indicators of Brilliance Group’s bonds before default in 2019,and the early warning effect is good.The findings of this paper are as follows:(1)The bond default phenomenon is one of the manifestations of a financial crisis,which shows a certain progressiveness and regularity,therefore,it can also be foreseen.By comprehensively analyzing the impact of internal and external factors on enterprises,the main factors can be identified,predictive indicators can be found,and then an early warning system can be established.(2)Whether an enterprise will default on its bonds and the level of risk of defaulting on its bonds can be seen in some indications from the financial statements of the enterprise.(3)This paper analyzes the causes of Brilliance Group’s bond defaults and the results of risk early warning by reviewing and analyzing the bond defaults of Brilliance Group and applying the early warning system.The early warning results show that the company has a great risk of default,and its risk shows a trend of increasing year by year.At last,corresponding preventive suggestions are made: all kinds of investors need to make reasonable use of early warning models to correctly predict the financial situation of enterprises,choose multiple varieties of bonds to diversify their investments,improve their investment risk awareness and risk recognition ability,and make reasonable expectations,etc.