Real Estate Enterprise Bond Default And Early Warning Analysis

In recent years,with the continuous strengthening of national macro-control and the continuous improvement of enterprise concentration,the "20-80 rule" has occurred in domestic real estate industry,and the "golden age" of the industry has passed.Especially for small and medium-sized real estate enterprises,in the case of insufficient profitability,they often choose a highly leveraged operating model or blind diversification for development,and eventually suffer bond defaults or even bankruptcy and delisting due to poor management or difficulty in resisting policy risks.In fact,in 2021,real estate has become the industry with the highest cumulative default amount of bonds in China.Nearly 400 real estate companies went bankrupt throughout the year,which seriously damaged the market investment confidence.Therefore,it is an urgent problem to be solved in domestic real estate industry and even the entire bond market to find out the reasons for the default of real estate enterprises’ bonds and to give effective and early warning of their bond default risks.Based on the case of the bond default of Zhonghong Stocks,this thesis conducts a more systematic study on the cause and early warning of the case company’s default.First of all,sorting domestic and foreign related researches,summarizing the achievements and limitations of current research.Secondly,by the mean of the case analysis method,review the company’s operations,bond issuance and bond default process,and explore the deep-seated reasons behind the bond default process.Thirdly,using the modified Z-score model combined with the corporate bond credit rating to measure the bond default risk of Zhonghong Stocks,by calculating the modified Z-value of Zhonghong Stocks and other real estate companies with actual bond defaults and other real estate companies for comparative analysis,and using the modified KMV model to calculate the company’s default distance is verified by comparative analysis to verify the effectiveness of the early warning model for domestic real estate companies.Finally,according to the causes of bond defaults summarized above,targeted suggestions are put forward for domestic real estate enterprises and market supervision departments.Through case studies,this thesis finds that the reasons for the default of Zhonghong Stocks’ bonds include overly aggressive diversification and overseas strategies,huge financial pressure,"management overriding" resulting in failure of internal control and tightening of the policy environment.Through the comparison and demonstration of the modified Z-score model,KMV model calculation results and credit ratings,it is found that the rating results issued by Dagong International for Zhonghong are inflated and lagging behind.The company conducts a comparative analysis of the Z value,which confirms the effectiveness of the modified Z-score model and the KMV model in predicting the debt default risk of domestic real estate companies.Finally,based on the analysis of the reasons for the default of Zhonghong Stocks’ bonds,this thesis gives some advises,such as focusing on the impact of the business environment,avoiding the disconnection of strategic development,enforcing the management control of enterprises,improving the management level,and improving the access and supervision mechanism of domestic bond market.Provide reference for the long-term sustainable development of the market.