The real purpose of debt-to-equity swap is to "reform the system" and establish a modern enterprise system by using debt-to-equity swap; The second is to set up an asset management company through financial investment to "supervise" the debts owed by banks to enterprises and resolve financial risks. Debt-to-equity swap is an important strategic move, and its role and significance are undeniable. However, in practice, if the relevant parties do not have corresponding constraints and incentives and form corresponding motivation and pressure, it may induce moral hazard or even unethical behavior of debt-to-equity swap, leading to the dislocation of enterprise goals and making its effectiveness impossible to achieve. The author analyzes the problem of debt-to-equity swap from the financial point of view and puts forward some countermeasures for reference. 1. Set a certain proportion of preferred shares. Compared with common stock, preferred stock generally has a fixed dividend and the priority right to claim the remaining property. Converting a certain proportion of non-performing assets into preferred shares can, on the one hand, reduce the conversion risk and investment risk of asset management companies to a certain extent and stabilize their investment income level; On the other hand, it can also optimize the capital structure of indebted enterprises and increase the value of enterprises. 2. Set a certain proportion of convertible bonds. In order to further protect the interests of debt-to-equity swap shareholders, effectively restrain the moral hazard and unethical behavior of debt enterprises and prevent their goals from being misplaced, a certain proportion of convertible bonds can be set up as a "buffer and pressure" tool for debt-to-equity swap. Convertible bonds refer to bonds that holders can freely convert into enterprise stocks within a certain period of time and under certain conditions. It has dual attributes. Before the share conversion, it represents the creditor-debtor relationship between the bondholder and the enterprise. From the enterprise's point of view, it raises debt funds. After the conversion, it represents the investment and capital contribution relationship between bondholders and enterprises. From the perspective of enterprises, it raises equity funds, that is, capital. Generally speaking, only when the business performance of the enterprise continues to be optimistic for a certain period of time, the value of the enterprise continues to increase or the stock price continues to rise, and the bondholders think that it is profitable to convert into enterprise stocks at a certain proportion and price, will the conversion behavior be carried out. Convertible bond is a financial tool to effectively restrain the moral hazard of debt-to-equity swap enterprises and prevent unethical behavior, and it is also one of the effective means to stabilize investors' income and reduce investment risks. 3. Set the resale clause or protective clause for the debt-to-equity swap. The resale clause includes: the shareholders of debt-to-equity swaps have the right (but not the obligation) to resell their shares to the enterprise at a pre-agreed price at any time within a certain period of time, and the enterprise shall buy them back unconditionally at that time. The resale clause is similar to the American put option, which is more powerful in protecting shareholders' rights and interests and more binding on the moral hazard of enterprises in debt-to-equity swap. The resale clause is an effective mechanism to automatically monitor the normal operation of debt-to-equity swaps: if the operating conditions of enterprises improve and the stock price naturally appreciates after the implementation of debt-to-equity swaps, asset management companies do not need to resell their shares, but wait for further appreciation, and debt-to-equity swaps can continue to operate; If the operating conditions of the enterprise have not improved after the implementation of debt-to-equity swap, its share price may be lowered, and the asset management company does not need to continue holding shares, but sells them back to the enterprise, and the debt-to-equity swap is invalid. Protective clause is a special clause that effectively protects the rights and interests of shareholders in debt-to-equity swap, and it is a rigid constraint on enterprises. For example, it is stipulated that debt-to-equity swaps cannot raise funds and issue new shares until they reach a certain level of profitability; Enterprises that cannot provide external guarantees within a certain period of time and cannot dispose of assets without the approval of the shareholders' meeting or the board of directors. This kind of protective clause restricts some business activities of enterprises and ensures the realization of the goal of debt-to-equity swap. 4. Establish employee stock ownership plan and enterprise manager stock option. From the perspective of incentive mechanism, the measures to solve the moral hazard of enterprises are the executive stock option system and employee stock ownership plan, which are popular in developed countries with market economy, especially Japan and Germany. The central intention of this move is to start the internal incentive mechanism of enterprises, especially the incentive mechanism of enterprise managers. The specific measures are: let the managers of enterprises hold a certain proportion of enterprise stock options, let the employees of enterprises hold a certain proportion of enterprise stocks, and bind the interests of managers and employees with the interests of shareholders, so that managers and employees of enterprises can pursue their own interests and protect the interests of shareholders. This measure can not only effectively prevent the unethical behavior of debt-to-equity swap enterprises, but also promote their financial goal of maximizing enterprise value and ensure the preservation and appreciation of equity investment of asset management companies. The fundamental way to realize the strategic goal of debt-to-equity swap is to improve the management level of debt-to-equity swap enterprises, especially the financial management level. The improvement of enterprise's financial management level can not only promote its capital structure optimization, reduce capital cost, improve profitability and maximize enterprise value, but also cultivate rich "profit sources" for the protection of the interests of all parties involved in debt-to-equity swap, so as to preserve and increase the equity investment of asset management companies and truly realize the strategic goal of debt-to-equity swap.

Legal objectivity:

Company Law of the People's Republic of China

Article 5

Companies engaged in business activities must abide by laws, administrative regulations, social ethics and business ethics, be honest and trustworthy, accept the supervision of the government and the public, and assume social responsibilities. The legitimate rights and interests of the company are protected by law and shall not be infringed.