By Zhang Jiaming & Zhang Liping, Research Institute of Finance, DRC

Research Report, No.118, 2021 (Total 6183) 2021-5-12

Abstract: Recently, some leading enterprises including Hainan Airlines, Yurun Group and Peking University Founder Group Corp. declared bankruptcy one after another and released bankruptcy through reorganization plans, and these events have caused wide public concern. Compared with small and medium-sized enterprises (SMEs), the bankruptcy of leading enterprises can easily cause systemic risks in respective sectors. At present, China’s macro-economy has just recovered from the impact induced by COVID-19 pandemic. At this crucial period, if we could follow closely on the performance of those leading enterprises with massive debts and provide timely bailout measures for these enterprises bogged down in difficulties, we could effectively boost the market confidence. Based on an in-depth analysis on related cases of 12 listed companies, we find that these companies underwent successful reorganization and emerged from bankruptcy. Their success mainly attributes to three major factors: one, the core assets of the enterprises still held market value; two, the government offered timely bailout measures; three, strategic investors with strong capacity got involved. With the aim of further bringing into play the positive role of the above-mentioned three supportive factors, the paper notes that the supervision over enterprises with systemic importance needs to be strengthened; the identification of core assets owned by the enterprises waiting for reorganization needs to be enhanced; a cross-department and cross-area coordinating mechanism needs to be established; relevant bailout measures need to be rolled out prior to the violation of market rules by defaulters.

Keywords: leading companies, bankruptcy through reorganization, case study