The Research On Causes And Risks Of Bond Default Of LF Company

In recent years,along with the downward spiral of China’s economy and the enhancement of external uncertainties,defaults in China’s bond market have been frequent,showing a normalized feature,involving rising default amounts and an increasingly wide distribution of defaulting subjects by industry.Therefore,it is important for the healthy development of China’s bond market and the overall economy to further enrich and improve the research on corporate bond defaults and the case analysis of typical defaulting companies.Based on the above background,this paper selects LF,a private company in the automobile manufacturing industry,as the case study object,compares its historical development and the whole process of its bond issuance and default,and comprehensively studies its default causes and default risks.This paper firstly reviews the research results of domestic and foreign scholars in the field of bond default,and then analyzes the causes of LF’s bond default from three levels,including macroeconomic,industry environment and corporate subjects,by using relevant theories and case study method and combining qualitative and quantitative analysis.It was found that the economic downturn,the deterioration of the financing environment and the fierce competition in the auto industry in recent years and entering the recession cycle in China were the external factors that led to LF’s poor development;while the main reasons that led to the company’s eventual default were the internal factors of the company,the weak profitability,insufficient solvency and serious imbalance in the asset and liability structure over a long period of time,which made the company’s financial difficulties gradually intensify,while the company had At the same time,the company’s aggressive strategy and internal governance deficiencies eventually led to a concentration of conflicts and bond defaults.Based on the analysis of the causes of default,this paper adopts the Z-Score model and the KMV model to measure the default risk of LF company and portray the change trend of default risk respectively.The empirical evidence shows that the two models are suitable for analyzing the bond default risk of individual companies and can provide warnings on the default risk of LF company.Further,this paper compares the results of the two models with the rating agencies’ rating results for analysis,and the results show that the rating agencies failed to accurately assess the default risk of the company in this case,and there is a lag in the adjustment of the rating results.Finally,based on the above analysis,this paper summarizes and proposes corresponding policy recommendations,which mainly provide insights and references for bond issuers on how to prevent and control default risks,and also provide reasonable suggestions to the government and regulatory authorities and credit rating agencies,in order to promote the development and improvement of China’s bond market.