Research On The Causes And Economic Consequences Of Tongjitang Medicine Bond Default

Corporate bonds,as one of the three basic securities in developed capital markets,are favored by fundraisers because of their low cost and tax-saving effects.Against the background of the expanding scale of bond defaults by private enterprises,pharmaceutical distribution enterprises,which are characterized by difficulties in recovering accounts receivable,have seen their external financing needs expand under the environment of the COVID-19,the implementation of the "two-invoice " policy and the deepening of the healthcare reform,so it has become more realistic to explore the causes and economic consequences of their bond defaults.Under this background,this paper takes the bond default of Tongjitang Medicine as the research object and adopts the methods of literature review,case study,financial index analysis and event analysis to study the causes and the economic consequences of bond default,so as to draw research conclusions and revelations.On the one hand,it is a supplement to the case study of bond default in China and enriches the case study related to the bond default of pharmaceutical distribution enterprises.On the other hand,this paper also explores the problem of divesting the non-performing assets of shell-listed enterprises and the problem of deprived corporate governance of controlling shareholders among the causes of bond defaults,which expands and supplements the causes of bond defaults.In addition,this paper analyzes the impact of bond defaults on the firms and on the market,complementing the micro and macro perspectives of the analysis of the economic consequences of bond defaults.Firstly,this paper summarizes the existing research results on bond default from five aspects: bond default concept,model,disposal and prevention,causes and economic consequences,explaining the theoretical basis of this paper.Secondly,this paper introduces Tongjitang,and introduces its basic financial situation from three aspects: profitability,cash flow and debt structure,and also elaborates the bond default process of Tongjitang Medicine.Thirdly,the paper summarizes the causes of bond default from three perspectives of external environment,corporate behavior and financial characteristics.At the same time,using the Z-Score model assesses the risk of Tongjitang,reflecting its financial situation,and thus explaining the causes of Tongjitang Medicine’s bond default.Then,this paper analyzes the economic consequences of Tongjitang Medicine’s bond default in terms of both short-term market reactions and long-term influence on corporation.Finally,the conclusions of this paper are as follows: First,corporate bond defaults are not accidental.There are often signs of default,including external and internal factors.Second,among the internal causes of corporate bond default,in addition to focusing on corporate financial characteristics,corporate behavior is also a key factor leading to bond defaults.Third,the economic consequences of corporate bond default are significant,long-term and multifaceted,including negative short-term direct effects and negative long-term indirect effects.In this regard,this paper enlightens bond issuers to prevent bond default risks and provides them with certain ideas to deal with bond default risks.