Researches On Corporate Bond Credit Risk Issues

According to the corporate financing advantage theory, issuance of corporate bonds is an ideal way to corporate direct financing. Instead of bank loans, issuance of bonds can avoid non-performing loans crisis from excessive dependence on Banks, so it plays a very important role in reducing the banking systematic risk and keeping steady state financing structure. From the perspective of the issuers, issuance of corporate bonds enables companies to raise funds quickly to expand production, to adjust the corporate’s financial structure moderately to increase the debt ratio so that make domino effect of financial level play effectively, and to issue in low cost to avoid corporate decentralized authority. Besides, it is a kind of tax bond. In bond investors’point of view, bond rate is higher than the risk-free interest rate (savings, debt, etc.), there are restrictive provision to guarantee maturity principal and interest repayment. Compared with the stock investment, bond rate owns small risk, high safety, and stable income.The development of bond market in our country lags behind, the bond amount accounts for only24%of GDP, compared with95%of developed countries, the proportion is very small. This is related to not only the strict limit by policy of corporate bond issuance and trade, but also the factors of lack of credit between companies and intermediary agencies, nonstandard criet rating and poor bond liquidity. Credit risk is the main risk of corporate bond market, the development of corporate bond financing, however, plays an important role in the optimization of enterprise financing structure, releasing the risk in the financial system, and promoting the healthy development of capital market.This paper starts from the status quo analysis of corporate bond market in China, analyzes the risk characteristics of corporate bonds, makes it clear that credit risk mainly refers to the default risk that the issuance of the enterprise couldn’t repay the principal and interest of the bond in accordance with the contract, which mainly measured in credit spreads. Credit spread is the difference of yields between corporate and national bond that has the same due time. Generally, the bigger credit spreads,the more credit risks. Credit spreads and other risks are closely inseparable, such as liquidity risk, interest rate risk, reinvestment risk, inflation risk, management risk, etc. This paper probes into corporate bond credit risk formation mechanism with uncertainty and asymmetric information situation in our country from the perspective of macro and micro, analyzes influence factors of credit risk, combines theory and demonstration, solves the issue through the structure of mathematical model, in order to effectively design risk prevention mechanism and promote corporate bond market path in our country.The first chapter is the introduction part, this part introduces the research background and reviews the research literature of corporate bond both domestic and overseas. The starting points of corporate bond research are factor decomposition of the corporate bond credit spread, credit risk valuation theory, uncertainty and asymmetric information. And this chapter also arranges the research technical routes, methods and structures.The second chapter proves a proposition of the stepwise regression analysis,and discusses the factors of corporate bond credit risk in our country by using mathematical statistics research. Based on the macroeconomic environment and micro enterprise value information uncertainty and asymmetry, selecting related macroeconomic indicators (interest rates, exchange rates, the CPI, stock index volatility, etc.) and micro enterprise financial data (debt ratio, profitability, liquidity ratio, asset turnover, etc.), using regression analysis method to study the significant influence factor of credit spreads, with statistical tests, it is concluded that asymmetric and non-deteministic information is the important cause of credit risk. Here the main idea for variable screen is stepwise regression method. This paper proves stepwise regression for variable screen by introducing the variable at the first and second step without deleting variable at the third step. Respectively, using factor analysis and cluster analysis method to demonstrate, the index variable structure analysis and classification. Factor analysis based on covariance matrix structure, resolves each variable into common factors and special factors, classifies variables or samples from the perspective of common factor. Cluster analysis mainly carries on systematic clustering of variables from the similar distance or from the size of the sum of deviation square. The two methods obtain nearly same classification conclusion.The third chapter analyzes the corporate bond market asymmetric information which leads to adverse selection and moral hazard problems, and uses the ideas like game theory, principal-agent incentive theory and Bayesian decision theory to reduce information asymmetry for reasonable decision-making mechanism. Through the signal transmission, the enterprise managers use debt ratio, to some extent, to show the corporate management ability and reliable quality, in order to attract investors to buy corresponding corporate bonds to solve the adverse selection problem of ex-ante asymmetric information in the process of financing. Further introduce reputation game to delivery real and effective messages. This chapter also consider using Bayesian statistical decision theory to process asymmetric information, thus obtain the Bayesian estimation that has the minimum enterprise type parameter of the Bayesian risk under quadratic loss, at the same time, try to judge and indicate scientifically true and false of the proposition through hypothesis testing. As ex-post asymmetric information leading to the moral hazard problem of corporate bonds, this chapter applies principal-agent method into mechanism design, researches how the enterprises motivate agents work hard in two tasks at the same time, analyzes the factors affecting the efforts remuneration. Concluded is that optimal performance reward is the decreasing function of absolute risk aversion, marginal cost of incentives and observed variables variance, at the same time, also synclastic affected by exogenous variable signals. Finally, this chapter analyzes the collusion problem in corporate bond market, points out that its origins lie in the asymmetric information of corporate bond market. The government should strengthen the supervision, establish a normative information disclosure system, and regulate the market conduct of intermediary agencies and credit rating agencies in accordance with the law.The forth chapter first analyzed the influence factors of corporate bond credit risk--the macro economic environment and micro enterprise internal value are uncertain. This chapter analyzes factors affecting corporate bonds, selects the appropriate index evaluation system to establish the evaluation model of evidence theory. Begin with evidence conflict degree, it puts forward to redistribute the basic probability that take credible rate as the weight of evidence, uses an improved synthetic method of evidence theory for indexes of information from different evidence sources, effectively make use of some useful information from evidence conflict to get the basic probability allocation value of credit risk, in order to provide scientific basis for the administrative decision of the corporate bond credit risk. The examples in this charpter are unit focal elements, so the credibility interval is zero. In general situation of non-unit focal elements, the credibility interval can be calculated to obtain uncertainty from the relevant proposition. Synthetic method of evidence theory can be futher improved, for example, it should be considered that the different evidence basic probability assignment of synthetic formula should have different weights, and weight should not only reflect part in evidence conflict. A new improved method is premised on maintain some basic properties of the evidence synthesis (commutative law, associative law, polarity, etc.).The fifth chapter aims at conclusions and prospect, and points out the deficiencies and directions in the future.Corporate bond, as an important way of exogenous financing, should be vigorously promoted and developed in our country. But all markets stakeholders-company managers, investors, regulators, and mediation, due to information asymmetry and uncertainty factors, exist in the conflicts of interest, which not only needs configure of market mechanism, but also needs the government to regulate all aspects of system and behavior, in order to safeguard the interests of all parties. The market access and the intermediary regulation, can be neither with too much intervention nor completely no controled, must hold good macroeconomic regulation and control of discretion. All interests should be subject to discipline and risk sharing. The government cannot be out for the default enterprise, investors also should have a correct understanding of the investment risk to learn to control reasonable investment and decentralized risk. The credit rating agency should standardize the operation and establish good reputation mechanism. Enterprises should be honest and trustworthy in accordance with the law. Thus, there will be a healthy and sustainable developing corporate bond market in China.The innovations of this paper are as follows:(1) This paper discusses the essential attribute of information and risk, by using applied statistical method and empirical method to study the factors affecting the credit risks of corporate bonds, and by using applied econometrics to evaluate the cedit risks. This paper proves one proposition that stepwise regression for variable screen:the first and second step to introduce the variable and the third step does not need to consider deleting variable.(2) This paper is concentrated on the need of corporate bond market, and uncertainty information processing in credit rating issue, by using evidence theory to describe the unknown extent of the information in order to have a credit rating. This paper also puts forward a new synthetic formula for the allocation of elementary probability.(3) This paper studies the adverse selection of corporate bonds from issuance to period of capital and interest repayment and the design of moral risk prevention mechanism in a asymmetric information situation, by using principal-agent incentive theory. This paper also constructs a Bayesian estimation test model, and designs a mechanism to motivate the agent to work hard task under two circumstances by introducing the exogenous variables.(4) By using game theory to study collusion between corporate bond market credit rating agencies and enterprises.