Research On The Financial Effect Of Market-oriented Debt-to-equity Swap

In recent years,China’s development level has been continuously improving,and the real economy has also experienced rapid development driven by strong stimulus policies.However,the expansion of scale has also made some enterprises’ debt burden increasingly heavy and their business situation increasingly difficult.In order to improve the financial situation of enterprises,promote supply side structural reform,and guide the transformation of China’s economy from high-speed development to high-quality development,the State Council officially released the "Guiding Opinions on Converting Debts to Equity of Market-oriented Banks" in October 2016 to encourage the implementation of market-oriented debt-to-equity swap,which represents the official launch of market-oriented debt-to-equity swap in China.Compared with the previous Policy-based debt-to-equity swap,the new round of market-oriented debt-to-equity swap highlights more market-oriented principles in terms of participants and exit methods.AECC Aviation Power overcame the complicated international situation and the impact of the COVID-19.Through the concerted efforts of all parties,it introduced the implementation agency with three subsidiaries as the target,and then the parent company purchased the equity of the target company,thus successfully completing the market-oriented debt-to-equity swap.The market-oriented debt-to-equity swap of AECC Aviation Power is the first classic case in this round of market-oriented debt-to-equity swap that locks in all investors during the board stage,and has rich research significance.This article selects the market-oriented debt-to-equity swap of AECC Aviation Power as a case study for analysis,hoping to provide reference for enterprises that want to reduce their financial burden through market-oriented debt-to-equity swap in the future.This article first reviews the research results of domestic and foreign scholars from three perspectives: the implementation motivation,mode,and financial effects of debt-to-equity swap.It combines theories related to debt-to-equity swap,such as MM theory and trade-off theory,principal-agent theory,game theory,and signal transmission theory,to lay the foundation for further analysis.Secondly,describe the basic situation of AECC Aviation Power,the reasons for market-oriented debt-to-equity swap,and the process of implementing market-oriented debt-to-equity swap,and provide a detailed introduction to the case.Then the financial effect of market-oriented debt-to-equity swap of AECC Aviation Power is analyzed in detail from four aspects: market reaction,financial situation,comprehensive financial situation and financial risk,respectively using the event study,financial indicator analysis method,factor analysis method and Z-score model.The research results found that the implementation of the market-oriented debt-to-equity swap of AECC Aviation Power has produced a positive market reaction,improving operational capacity,debt repayment capability,and development capability.The impact on profitability is not clearly reflected,but further analysis shows that the comprehensive financial situation has been improved,while also reducing the financial risk of AECC Aviation Power.From this,it can be seen that the market-oriented debt-to-equity swap has brought positive financial effects to AECC Aviation Power.Based on the research on the financial effects of market-oriented debt-to-equity swap for AECC Aviation Power,this article draws the following insights:market-oriented debt-to-equity swap is an effective way to alleviate financial difficulties;The principle of marketization is the key to the implementation of market-oriented debt-to-equity swap;A suitable solution is the guarantee for the success of market-oriented debt-to-equity swap;Continuous incentives are the driving force for promoting market-oriented debt-to-equity swap.The following suggestions are put forward: Improve business management to maintain long-term development;Strengthen debt constraints to strengthen risk control;Optimize the governance system to protect shareholder rights and interests;Increase financing methods to broaden funding channels.