Research On The Motivation And Effect Of Deleveraging In State-Owned Construction Enterprises

Since November 2014,China has continued to implement a combination of interest rate and reserve ratio cuts to support the sustainable and healthy development of the real economy.Deleveraging of enterprises is of great significance to prevent foam of economic development,ensure that economic development turns from virtual to real,and maintain the healthy development of China’s economy.An enterprise may promote its development by using leverage reasonably and maintaining an appropriate leverage ratio,but too high a leverage ratio will bring many risks and hazards.If the leverage ratio of the enterprise is too high,the enterprise’s debt repayment pressure and financial burden will inevitably increase,which may seriously affect the enterprise’s operating conditions,or even lead to enterprise bankruptcy;High leverage not only brings harm to enterprises themselves,but also affects affiliated enterprises;Too high leverage ratio of many enterprises or industries in a country will seriously affect the stability of the financial market,trigger financial crisis and affect social stability.Before 2014,China’s enterprise leverage ratio has been high.From 2012 to 2014,the average leverage ratio of state-owned enterprises was 55.50%,55.24% and 54.66%respectively,which was higher than the average leverage ratio of private enterprises,while the average leverage ratio of the construction industry was 80.29%,80.88% and80.20% respectively,which was higher than the average leverage ratio of the whole non-financial industry by more than 24.83% year by year.Therefore,China attaches great importance to the deleveraging of enterprises.Since December 2014,many relevant policies have been issued,which require enterprises,especially state-owned enterprises,to deleverage and reduce the leverage ratio.After the country continued to implement the deleveraging policy,from 2015 to 2021,the average leverage ratio of state-owned enterprises will be between 52.08% and 54.16%,and the average leverage ratio of the construction industry will be between 76.17% and 79.25%,which is significantly lower than before the implementation of the deleveraging policy.Its deleveraging process and effect are worth studying.State owned construction enterprises are both state-owned enterprises and belong to the construction industry,with a high leverage ratio.In the past decade,the average leverage ratio of State owned construction enterprises has ranged from 72.97% to 79.77%.The leverage ratio of CRCC is between 74.39% and 84.84%,which is in the forefront of the leverage ratio of state-owned construction enterprises.Therefore,this paper chooses the deleveraging of China Railway Construction Corporation as a case to study the motivation and effect of deleveraging of construction state-owned enterprises,which is representative and necessary.This paper focuses on the collection and research of domestic and foreign deleveraging related literature,summarizes and combs the literature content and related concepts and theories,draws lessons from the existing theoretical methods and application results,and carries out the research on the motivation and effect of deleveraging of state-owned construction enterprises on this basis.First of all,this paper uses the case study method to introduce the case of China Railway Construction Corporation,the leverage of China Railway Construction Corporation and the deleveraging of China Railway Construction Corporation.This paper analyzes the motivation of China Railway Construction deleveraging from five aspects: responding to national policy requirements,optimizing enterprise capital structure,reducing debt risk,improving the demand for profits,and alleviating the problem of insufficient cash flow.Then,according to the capital structure,short-term solvency,long-term solvency,operating capacity,profitability,cash flow of operation and financing,and technological innovation ability,this paper selects 17 analysis indicators.The statistical analysis method is used to analyze the index data,so as to analyze the deleveraging effect of China Railway Construction from seven aspects: capital structure,short-term solvency,long-term solvency,operating capacity,profitability,operating and financing cash flow,and technological innovation ability.Finally,the motivation and effect of China Railway Construction deleveraging are analyzed and summarized,and suggestions are put forward for China Railway Construction deleveraging.This paper enriches the relevant case studies on the causes and effects of deleveraging of state-owned construction enterprises,provides important references for research ideas and intellectual support for practical operations for deleveraging of state-owned construction enterprises,and puts forward useful suggestions for deleveraging of China Railway Construction and the benign development of China railway construction.