Comparative Study On The Implementation Effect Of Differentiated Debt-equity Swap Model

Since the economic "new normal",China’s economy has shifted from high-speed growth to medium-high growth.With the increasing downward pressure on the economy,the historical problems accumulated by economic overheating have begun to emerge.To this end,the Central Economic Work Conference in December 2015 put forward the major task of "three deregulation,one reduction and one complement",and the supplyside structural reform is imperative.The report of the 19 th CPC National Congress once again emphasized "the important deployment of deepening supply-side structural reform",and market-oriented debt-equity swap is an important practice of "deleveraging" in supply-side structural reform.In October 2016,the State Council issued "about actively yet prudently to reduce enterprise’s opinions on leverage and released in the form of attachment on the guidance of marketization of bank debt to equity,officially marked the resumption of marketization debts into shares,and after 1999" policy debt turned stock"resolve commercial bank non-performing loans,alleviate the financial risk,Derivative innovations that reduce high corporate leverage.However,due to operational mechanism,related transaction and operational risk,the process of debt-equity swap is not smooth.It is reported that from October 2016 to the end of 2019,although the amount involved in China’s debt-for-equity swap project has exceeded 3.5 trillion yuan,the fund in place for the debt-for-equity swap project is only 1.4 trillion yuan,less than 40% of the contracted scale.Even the five major AIC institutions,as important implementation institutions of debt-equity swaps,had only received 1.09 trillion yuan of funds by the end of 2019,accounting for 49.84% of their total contract scale.In addition,the leverage ratio of nonfinancial enterprises and the non-performing loan ratio of commercial banks are also on the rise,rising from 157.6% in 2016 to 162.3% in 2020 and 1.74% to 1.84% in 2020 respectively.Under this background,the academic circle has carried on the extensive discussion to the debt-equity conversion effect.But in these studies,most of the researches on "market-oriented debt-equity swap"focus on qualitative analysis of cases and theories.There are few quantitative studies on the effects of debt-equity swaps based on data.As Nobel Laureate Friedrich Hayek once said,"All our knowledge is knowledge of patterns." Therefore,released on June 6,2018 silver ia "investment company,financial assets management method(trial)",except to encourage the implementation of the traditional bonds convertible model allows multiple do debt-for-equity business model innovation,and in November the same year,the National Development and Reform Commission issued "about encourage institutions to participate in market debt convertible notice,encourage diversified subject to participate in market debts into shares.It can be seen that taking the market-oriented principle and innovating the debt-equity swap model as the focal point is an important support for promoting the new development pattern and preventing and controlling financial risks.What are the reasons that restrict the process of a new round of market-oriented debt-forequity swaps? How to effectively promote a new round of market-oriented debt-forequity swap process? The analysis of these two problems has become the focus of the research.To answer these two questions,it is crucial to clarify the effect of market-based debt-equity swap.Based on the above considerations,this paper studies the effect of the new round of market-oriented debt-equity swaps based on the main implementation mode.This paper is divided into six parts.Among them:The first part is the introduction of the research background and significance of the whole paper.This part analyzes the background and significance of market-oriented debtequity swap in detail in combination with the new normal of China’s economy and the supply-side structural reform strategy.On this basis,the second part of the paper expounds the relevant concepts and theoretical basis involved in this research.Based on the development of China’s national conditions,this part focuses on combing and comparing the causes and related policies of China’s two rounds of debt-equity swaps.The third part of the thesis is on the basis of previous study,from the perspective of differential mode,sums up the two different mode of debt-to-equity swap,then introducing typical cases in recent years,and then analyze debt-for-equity the differentiation pattern on the listed companies has different influence on the investment performance and financial performance,finally put forward in this paper,the research hypothesis;Therefore,the fourth part of the paper uses the event study method from a quantitative perspective to analyze whether investors have different market reactions to the information of the debt-equity swap with differentiated mode after the announcement of the debt-equity swap event,resulting in differences in investment performance,so as to verify hypothesis 1 above;The fifth part of the paper uses propensity score matching,differential difference method and factor analysis method to observe whether the adoption of differentiated debt-equity swap model will have different impacts on the financial performance of enterprises from vertical and horizontal perspectives,so as to verify hypothesis 2 above.Finally,the sixth part of the paper puts forward some suggestions according to the previous research conclusions.The results show that :(1)investors have different expectations for companies that implement debt-to-equity swaps in the differentiated mode.Under the condition of controlling other factors,the cumulative excess return of stocks of listed companies that implement debt-to-equity swaps in the "debt-to-equity" mode is significantly better than that of listed companies that implement debt-to-equity swaps in the "debt-to-equity" mode;(2)The implementation of market-oriented debt-to-equity swaps has an obvious effect on the financial performance of debt-to-equity enterprises,and the improvement of comprehensive financial performance of listed companies that adopt the "debt-to-equity" mode is better than that of listed companies that adopt the "debt-to-equity" mode.To this end,this paper puts forward the following policy suggestions :(1)from the perspective of supervision,the regulatory authorities should adhere to the market-oriented principle to implement debt-equity swap and leave the debt-equity swap option to the market subjects.Encourage debt-to-equity enterprises to implement debt-to-equity swaps by issuing shares to repay debts,and create a better policy environment for debt-to-equity enterprises to implement debt-to-equity swaps by issuing shares to repay debts.(2)From the perspective of corporate governance,listed companies should give priority to the debtequity swap model that can maximize shareholder wealth when implementing debt-equity swap decisions.In view of the above research conclusions of this paper,the management and decision makers of listed companies should give priority to the debt-to-equity swap mode of "issuing shares to repay debts",and try to avoid the debt-to-equity swap mode of "buying shares to repay debts".