How debt structure can create a defensive effect against strategic default and the associated costs is a new research issue.We analyze the impact mechanism,distinguish strategic defaults from general defaults using the cash flow and balance sheet tests outlined in the Enterprise Bankruptcy Law,and verify theoretical hypotheses with data on credit bond issuance and default in China from 2014 to 2019.The research findings reveal that a decrease in the proportion of diversified and socialized public bond financing reduces the probability of strategic default;enterprises with a lower proportion of public bond financing not only exhibit a slower default rate but also have a lower proportion of default amounts;for non-bankrupt enterprises with relatively good operating conditions,reducing the proportion of public bond financing could increase the enterprise's burden and weaken the threat of bankruptcy,with little to no improvement in the return on assets.Relevant policies to address the issue include the rational design of stable market rules to encourage enterprises to develop their own internal immune mechanisms against strategic default,and the provision of sufficient and effective market tools to enable enterprises to adjust their asset and debt structures in a timely manner.
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