On January 17th, White Paper on Bankruptcy Restructuring of China’s Listed Companies (2022) - Case Study Report on Bankruptcy Restructuring of China’s Listed Companies from 2018 to 2021 was released by a group jointly formed by SAIF, the Center for Corporate Financial Research at CAFR, and the M&A and Restructuring Specialized Committee at Global Finance Leaders Forum.
The paper provides a comprehensive overview and study of bankruptcy restructuring cases for China listed companies in recent years. Summarizing the experience, it puts forward a number of policy recommendations to promote the standardization of bankruptcy restructuring of listed companies and to protect investors’ rights.
The paper shows that there’s no significant correlation between the share price after reorganization and net profit increase, for most companies. Although some listed companies have temporarily solved their debt crises through bankruptcy reorganization, their sustainable operation and profitability have not recovered. Some even use insider information in the restructuring for arbitrage, which harms the rights and interests of small and medium-sized investors and hampers the development of China’s capital markets.
Hence, the group proposed a number of policy recommendations, including: “Strengthen the review of restructuring plans, especially business plans”, “Increase penalties for market manipulation, insider trading and other illegal acts”, “Strengthen market education and focus on early diagnosis”, “Guide and explore experienced restructuring investors to participate in bankruptcy restructuring of listed companies”, and “Protect the interests of small and medium-sized investors”.