Corporate Bond Financing Study

Issuing bond is an important corporate financing channel in developed countries such as the U.S. and Canada, while it is negligible in China's corporate financing structure. In recent years many people argued that China government should allow corporations to issue more bond, but China's corporate financing environment is different from that in the U.S. and Canada, we shall make research before we decide whether it is necessary to promote corporate bond financing. This dissertation contributed to the research of corporate bond financing theory, and provided some ideas to promote corporate bond financing in China.Focusing on the theoretical basis and development preconditions of corporate bond financing, the author studied corporate bond financing theory from the viewpoint of microeconomics and macroeconomics, then studied corporate bond financing practice in the world generally and in China specifically. After studying corporate financing behavior, the author pointed out that large-scale companies require bond financing. Then the author analyzed the opportunity and conditions to develop corporate bond financing in a country and applied the conclusions to study the corporate bond financing practice in the U.S., Japan, Germany and some Southeast Asian countries. At last, the author studied the impact that corporate bond financing have on Chinese commercial banking industry, argued that it was necessary to develop corporate bond financing in China, and put forward some suggestions to promote corporate bond financing in China.Equity financing, bank loans and bond financing are the main external financing channels of companies, and the latter two channels belong to debt financing. Companies prefer debt financing to equity financing, but debt financing may bring bankruptcy cost and agency cost to the company, reduces financial flexibility of the company, and erodes manager's utility that results from manager's control of the company, therefore companies will limit its debt ratio to a certain degree. Companies choose bank loan or corporate bond according to the cost and period of each financing channel. The cost of bond financing is high for small and medium enterprises whose moral hazard are relatively high, while large enterprises can issue bond at low cost because they have better credit record and their moral hazard is relatively low. Therefore, large companies require bond financing.Corporate bond financing may prosper only after a country has the opportunity and preconditions of corporate bond financing. First, the country shall enter the mature stage of economic development, because there are many large enterprises that require bond financing in that stage. Second, corporate bond financing shall not be restricted by government and corporate bond market infrastructure exists in the country. The great difference of corporate bond financing practice in the U.S., Japan, Germany and some Southeast Asian Countries proves that. Bank loan is companies' main debt-financing channel in China, few companies can issue corporate bond because of institutional restrictions for issuing corporate bond. Chinese banks' loans go bad easily because of soft budget constraint, which threatens the stability of the bank system and the whole economy. Equity financing prospered in recent years, the small and medium equity-holder give funds to companies but they also can't restrain companies' behavior because of the institutional defects of the stock market and enterprise system, which results in the low efficiency of the funds from the stock-holder. Comparing to bank loans and equity financing, bond financing can restrain companies from misusing funds, therefore stabilize the whole financing system and raise companies' performance. China has entered the mature stage of economic development and has the basic conditions for development of corporate bond financing. To further promote corporate bond financing, we should eliminate the government constraints of corporate bond financing, allow more institutional investors...