| The establishment of inter-bank bond market in 1997 and the rise of the exchange bond market after 2004 further promote the development of Chinese bond market. By the end of 2013, as the third largest bond market in the world on the absolute amount, the Chinese bond market has not matched the national economic development or GDP. On the other hand, there are many deficiencies in Chinese bond market. For example, there are significant differences on the financial constraints among different types of companies. Chinese bond market resources’ allocation is inefficient, and protection for the investors is still relatively weak. So how to reduce constraints of the corporate financing in the bond market, improve the efficiency of resource allocation, as well as protecting the interests of investors, have caused extensive concerns by theorists and practitioners. The study of the issue is in favor of in-depth understanding of the bond market function, and it is important to realized the function of bond market, promote economic growth, stabilize financial order, and disperse investor risk, ultimately, these can provide a theoretical basis and empirical evidence for the development of appropriate policies to realize the function of the bond market. However, theoretical analyses and empirical researches of factors affecting the function of the bond market are still in the initial stage.Because of the special institutional background, the development of Chinese bond market is very slowly, and the main reasons are as follows: mismatch of market structure, serious intervention of government and segmentation of market, absence of regulatory and imperfection of information disclosure system. Some studies suggest Chinese bond market regulatory is mainly showing the trend of bull regulation and cross regulation, which will result in conflict, loss and inefficient of regulatory. However, the present study of regulatory regime is limited on the market effectiveness, lacking of quantitative analysis, and less regulation on the functions of the market, moreover, as the rapid development of the securities market and norms, all that whether the emergence of social supervision can help to solve market problems and to achieve regulatory functions or not, and the role of government regulation and social supervision is an alternative or complementary for bond market, are yet in blank.Therefore, based on the research object of Chinese bond market, the perspective of investor protection, and from three aspects including corporate finance constraints, resource allocation efficiency and wealth of the investors, using the date of corporate in Chinese Bond Market, this paper analyzs the functions of government regulation and media monitor for the bond market. First, based on empirical research of the government regulation, asymmetric information and agency theory, combined with the status of China’s bond market development, regulatory and special background, referenced the game theory and relevant ideas, the paper analyzes the necessity and effectiveness of the government regulation and media supervision for investor protection, and proposes the corresponding research hypotheses. Second, according to the corresponding research hypothesis, the paper defines the relevant variables, constructed the corresponding regression model, and used descriptive statistics, single variable and multiple regression analysis. After controlling a series of econometric problems(such as the endogeneity), and robustness test, the results shows that government regulation and media monitor is very important for the corporate finance constraints, resource allocation efficiency and wealth of the investors. Third, the paper tested whether various government regulatory quality and the different corporate ownership property have any influence on the government regulation, media monitor and investor protection or not. Finally, based on theoretical analysis and empirical test results, this paper proposes a series of policy recommendations to reduce the financing constraints, improve the efficiency of resource allocation and protect of creditors’ wealth.Through theoretical analysis and empirical testing, the paper finds that, government regulation and media monitoring can reduce financing constraints, improve the efficiency of resource allocation in enterprise or industry, improve the creditors’ wealth on the whole. However, compared with the efficiency of government regulation, the efficiency of media monitoring in improving the efficiency of resource allocation and protecting the creditors’ wealth is more obvious. In addition, the efficiency of government regulation and the media monitoring will be affected by different regulatory quality or corporate ownership property, which meant that, under different regulatory quality, the efficiency of media monitoring reflected some differences. What’s more, with different corporate ownership property, the efficiency of government regulation and media monitoring also have some differences. Finally, the paper also finds that the relation of financial constraints, resource allocation efficiency and the creditors’ wealth is an organic whole. Based on these, the main conclusions of the paper are as follows:1. The Government regulation, media monitoring and Financing ConstraintsFirstly, on the whole, the higher quality of government regulation, smaller government regulatory policy volatility, stronger media monitoring, the smaller corporate finance constraints will be. However, compared with media monitoring, government regulation plays a larger role in reducing financial constraints; secondly, with the quality of government regulation’s improving, the function of media monitoring on reducing corporate financing constraints will become weaker, that is to say, the role of media monitoring reducing financing constraints will become more significant on the background of the low quality of government regulation; thirdly, with respect to the state-owned enterprises, the role of government regulation on reducing financing constraints in non-state-owned enterprise is larger, and the media monitoring can only mostly reduce financing constraints in non-state-owned enterprises, which is not obvious in the state-owned enterprises, so on the whole, government regulation and media monitoring are more favorable to the non-state-owned companies. In short, the paper suggests that both current government regulation and media monitoring can reduce financing constraints and have an important role for the effective operation of the enterprise, however, we should focus on improving the overall quality of government regulation and reduce financing constraints radically. Further, regarding financing constraints, government regulation and media monitoring are complementary, that is to say, when government regulation is weaker, the function of the media monitoring is greater, this implies that, at this stage of China, there is still a gap between us and foreign developed countries’ governments. Government policy makers should not only improve the quality of government regulation but also strengthen media monitoring. More importantly, due to the presence of government burden, government would support lending practices of state-owned enterprises which will have a soft budget constraint, while the financing of private enterprises will subject to financing discrimination. By improving the quality of government regulation and media monitoring, financing constraints of private enterprises will reduce.2. The Government regulation, media monitoring and resource allocation efficiencyFirstly, the higher the quality of government regulation, smaller government regulatory policy volatility, stronger the media monitoring, then the higher the enterprise(industry) efficiency of resource allocation will be. However, compared with government regulation, the role of media monitoring in increasing resource allocation efficiency is lager. Secondly, with the quality of government regulation’s increasing, the function of media monitoring on reducing corporate financing constraints will decrease. Thirdly, with respect to the state-owned enterprises, the role of government regulation on efficiency of resource allocation in non-state-owned enterprise is larger, but the media monitoring can increase efficiency of resource allocation just only in non-state-owned enterprises, which is not obvious in the state-owned enterprises. So on the whole, government regulation and media monitoring are more favorable in the non-state-owned companies. In short, the paper suggests that the current government regulation and media monitoring can improve the efficiency of resource allocation, and this effect can be achieved by reducing financing constraints. Furthermore, government regulation and media monitoring are significant complementary in resource allocation, which is consistent with the role of corporate financing constraints. That is to say when the quality of the weak government regulation is lower, the role of the media monitoring is larger. In addition, due to the presence of the public purse, state-owned enterprises would over-investment, resulting in inefficient of resources allocation. Though with the improvement of the quality of government regulation, over-investment of state-owned enterprises will be reduced, but government regulation and media monitoring are more favorable to improving resource allocation efficiency of non-state-owned enterprises.3. Government regulation, media monitoring and creditor wealthFirstly, the higher the quality of government regulation, smaller government regulatory policy volatility, stronger media monitoring, the creditor wealth will be more susceptible to protect and enhance. However, compare with government regulation, media monitoring plays a larger role in easily protecting or enhancing the creditor wealth. Secondly, with the quality of government regulation is improving, the function of media monitoring on protecting and enhancing creditor wealth will decrease; that is to say, the role of media monitoring protect and enhance creditor wealth is more significant in the low quality of government regulatory environment. Third, with respect to the state-owned enterprises, the role of media monitoring on protecting and enhancing creditor wealth in non-state-owned enterprise is larger, but government regulatory can reduce efficiency of resource allocation just only in non-state-owned enterprises, which is not obvious in the state-owned enterprises. That means government regulation and media monitoring are more favorable in the non-state-owned companies. In short, paper suggests that under the theory of corporate governance and information asymmetry, government regulation and media monitor can indeed increase the wealth of bonders, this effect can be achieved by reducing financing constraints or improving resource allocation efficiency. Further, government regulation and media monitoring are significant complementary in protecting and enhancing creditor wealth. That is, when government regulation is weaker, the role of the media monitoring is larger. In addition, due to the presence of state-owned enterprises implicit guarantee of government departments, government regulation or media monitoring have no significant impact on creditor wealth, but have significant impact on those in the non-state-owned enterprises.This research provides empirical basis as well as expand the theoretical boundaries on government regulation, media monitoring, financial constraints, creditor wealth and the efficiency of resource allocation. We illustrate the usefulness of our analysis in three ways:Firstly, this paper expands the perspective of existing research. The prior literature on government regulation as well as media monitoring has been extend by our research. No conclusion has been achieved on the effectiveness of domestic governance regulation which is mainly demonstrated by event study through the examination on the security market. The quantitative research on the governance regulation is rare especially on the specific economic consequence. In addition, the studies on the corporate governance of media monitoring are on the aspects of agency cost, financial restatement, earning management as well as the executive compensation. In that way, this paper develops empirical study on the effect of governance regulation and media monitoring on the investor protection from the view of financial constrains, resource allocation efficiency and the creditor wealth. Within the expansion of related research, the importance and necessity of governance regulation and media monitoring has been emphasized. So this paper enriches the studies on the function of government regulation and media monitoring.Secondly, this paper enriches the studies of theory. The theoretical enrichment of research has been convinced by the construction of mix gambling model which illustrate the controversy of governance and media monitoring. We attempt to settle the argument initially on the importance of governance versus social monitoring(Glaeser and Shleifer, 2003;La Porta et al., 2006) by sampling the Chinese bond market. Based on solid theoretical analysis and examination, we demonstrate the reciprocity between governance monitoring and social monitoring which are of equally significance on the market implementation. In that way, our research has contributed to the multi-level regulation theory of bond market. And state-owned enterprises have soft budget constraint and overinvestment phenomenon.Third, this paper references on relevant recent literature to improve measure of the relevant variables. The previous methods on the efficiency measurement of resource allocation are mainly based on the model of Richardson(2006) and Wurgler(2000), which remains questionable. However our measurement of related variables has been improved by using TFP as the indicator of the resource allocation efficiency on enterprise level. We acquire the efficiency of industrial resource allocation by decomposing the total factor productivity of the industry(Bartelsman et al., 2013) and Tobin’s Q(Abiad et al., 2008). Moreover, the ignorance of the system background on mainland China has been corrected by the constructing and examination of Chinese SA index refer to the method of KZ index. Furthermore, we refurnish the measurement of creditor wealth by using the cost of carry on security credit. Therefore the enhancement of measuring has ensured the robustness of our conclusion and provides reference for the following research.
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