Research on Debt Risk Prevention Strategies for Chinese Financial Institutions

Yin Danni

doi:10.63944/4a0.JFEMR

Authors

Yin Danni Finance Department, Qujiang District Zhongyuan Water Operation Co., Ltd., Shaoguan, Guangdong 512199 Author

DOI:

https://doi.org/10.63944/4a0.JFEMR

Keywords:

economic downturn; financial institutions; debt risk; prevention strategies; risk management

Abstract

In recent years, many enterprises have been unable to repay debts on schedule due to liquidity constraints, leading to prominent debt risks in financial institutions. To mitigate such risks, this study takes CDL Securities as a case example. Empirical analysis is conducted on the interest rate spreads and returns of CDL’s investments in all A-share listed companies in China from 2015 to 2019 (based on 2011–2018 stock indices). Based on the findings, specific strategies are proposed, including: improving the debt risk management system, optimizing debt financing structures and capital allocation, and strengthening internal governance and external controls.

References

[1] Li, L., Qi, Y. (2020). Corporate debt and economic growth: A heavy chemical industry analysis. Journal of Sun Yat-sen University (Social Science Edition), 60(2), 165–175.

[2] Li, H. (2018). Strategies for strengthening internal controls under new conditions. Enterprise Reform and Management, (24), 25, 32. [3] He, J. (2014). Research on debt risks of Chinese listed companies [Doctoral dissertation, Chinese Academy of Fiscal Sciences].

[4] Zhao, Q., Zeng, H. (2016). National industrial policy, regional finance, and corporate debt maturity structure. Review of Economy and Management, 32(2), 137–144.

[5] Zhang, X., Shen, Y. (2018). Finance companies, capital structure changes, and debt costs. Journal of Changzhou University (Social Science Edition), 19(6), 55–62.

[6] Zhou, L., Liu, Y. (2020). Challenges and countermeasures for local government debt risk prevention: A literature review. Journal of Financial Development Research, (3), 58–64.57

[7] Smith, A. (1972). An inquiry into the nature and causes of the wealth of nations. Commercial Press.

[8] Weiss, S. (1981). Credit rationing in markets with imperfect information. American Economic Review, 71(3), 393–410.

[9] Chen, R. (1989). Asset-liability management in modern US and Japanese banks. Journal of Financial Research, (9), 50–52.

[10]Cheol, S. (2002). Theory of credit risk and securitization of non-performing loans. Journal of Financial and Quantitative Analysis, (3), 57–59.

[11]Wang, Z. (2007). Research on multi-dimensional risk management system for commercial banks. China Financial Publishing House. [in Chinese]

[12]Hu, H., Sun, F. (2010). Costs and benefits of fiscal bailouts during financial crises. Economic Theory and Business Management, (7), 51–57. [in Chinese]

[13]Zhou, Q., Huang, W., Liu, Y. (2007). Credit risk management strategies for group clients in commercial banks. New Finance, (10), 32–37. [in Chinese]

[14]Zhang, M., Zhang, Q. (2017). Practice and optimization of bank creditor committee mechanisms. Journal of Financial Development Research, (3), 86–88. [in Chinese]

[15]Research Group of China Academy of Macroeconomic Research. (2018). Fiscal policies for resolving debt of “zombie enterprises” in overcapacity sectors. Fiscal Science, (1). [in Chinese]

[16]Eisinga, R., Need, A., Coenders, M. (2012). Religion in Dutch society 2005–SOCON 2005. DANS. DOI: https://doi.org/10.1017/9789048518890

[17]Wang, S. (2006). Comparative study of exploratory and confirmatory factor analysis. Lanzhou Academic Journal, (5), 155–156. [in Chinese]

[18]Hair, J. F., et al. (2005). Multivariate data analysis (6th ed.). Pearson Prentice Hall. [19]Zhou, Z., Xiu, Z. (2017). Financial ecology, debt governance, and corporate capacity utilization: Evidence from China’s A-share manufacturing firms. Journal of Xiamen

University (Arts & Social Sciences), (6), 50–60. [in Chinese]