Research On Influencing Factors Of China's Credit Bond Issuance Pricing

Credit bond is one of the direct financing instruments,with the characteristics of high flexibility,strong liquidity and low financing cost.With the continuous improvement of China's economic development,issuing credit bonds has gradually become one of the main financing channels for Chinese enterprises.China's credit bond market has also ushered in a large-scale growth.The total trusteeship of credit bonds has exceeded one third of the total share of China's bond market,and plays a pivotal role in China's financial system.At the same time,China's economy is in the transitional stage from high-speed growth to high-quality development.Structural reform is also gradually deepening,and the frequency and scale of credit bond defaults are gradually increasing.How to better identify and control credit risk and promote the smooth and healthy development of the credit bond market is a difficult problem to be solved.As a key factor in the pricing process of issuing credit bonds,the issuing spread of credit bonds is an explicit indicator of the economic strength and risk level of the issuer,which is also an important variable affecting investment decisions.Systematic analysis of the factors affecting the issuing spread of credit bonds is of great significance to better understand the relevant credit risks.This paper chooses enterprise bonds,corporate bonds,short-term financing bonds and medium-term bills issued in 2012-2018 as the research samples of credit bonds.Based on principal-agent theory,information asymmetry theory and signal transmission theory,this paper adopts empirical research methods from three aspects: the characteristics of the issuer,the local institutional environment of the issuer and the protection of creditors,systematically studies the influencing factors of the credit bonds issuance pricing.Firstly,this paper chooses two indicators,administrative level and social responsibility disclosure,as representative indicators of the bond issuers' characteristics,to study their impact on the issuing spread of credit bond.The results show that the issuing spreads of credit bond in state-owned enterprises are significantly lower than those in non-state-owned enterprises,which indicates that ownership is one of the factors that significantly affect the credit bond issuance pricing.Further,this paper divides the central managed enterprises into two categories according to theleading official's administrative level of the enterprise,deputy ministerial level and main bureau level.The empirical results show that the credit bond issuing spread of the enterprises at the deputy ministerial level are lower than those of the enterprises at the main bureau level,which shows that a higher administrative level helps to reduce the credit bond issuing spread of the central managed enterprises.Next,this paper explores the impact of the social responsibility disclosure on credit bond issuing spread.The empirical results show that better social responsibility disclosure of bond issuers helps to reduce the issuing spread of credit bond.Furthermore,this paper analyses the impact of different social responsibility disclosure forms on credit bond issuing spread.The empirical results show that compared with the enterprises that disclose in accordance with regulations,the enterprises that voluntarily disclose social responsibility report have a more significant impact on reducing credit bond issuing spread.This paper also analyses the impact of social responsibility disclosure on credit bond issuing spread between state-owned enterprises and non-state-owned enterprises by grouping regression,and finds that social responsibility disclosure plays a more significant role in reducing the issuing spread of credit bond in non-state-owned enterprises,compared with state-owned enterprises.Secondly,this paper chooses the regional commercial credit environment,the regional legal system environment,the degree of Regional Marketization as three representative indicators of issuers' local institutional environment,to study their impact on the issuing spread of credit bond.Firstly,this paper discusses the impact of regional commercial credit environment on credit bond issuing spread,and finds that better regional commercial credit environment helps to reduce the issuing spread of credit bond.Furthermore,this paper analyses the impact of regional legal system environment on credit bond issuing spread.The empirical results show that better regional legal system environment is conducive to reducing the issuing spread of credit bond.Next,this paper studies the impact of Regional Marketization on credit bond issuing spread.The results show that credit bond issuing spread is lower in regions with higher regional marketization.The above findings provide support for the view that regional institutional environment differences affect the financing cost of enterprises in the region.Thirdly,this paper chooses bond credit enhancement and bond covenants as representative indicators of creditor protection measures to study their impact on the credit bond issuing spread.Firstly,this paper empirically analyses the impact of using credit enhancement measures on the issuing spread of credit bond.The results show that the using of credit enhancement measures helps to reduce the issuing spread of credit bond.Further,this paper studies two kinds of specific credit enhancement measures: irrevocable joint liability guarantee and mortgage guarantee,and their impact on the credit bond issuing spread.The empirical results show that the use of irrevocable joint liability guarantee can significantly reduce the issuing spread of credit bond,while the use of mortgage guarantee will not significantly affectthe issuing spread of credit bond.This paper also analyses the impact of using credit enhancement measures on credit bond issuing spread between state-owned enterprises and non-state-owned enterprises,as well as enterprises with low bankruptcy risks and enterprises with high bankruptcy risks.The empirical results show that compared with non-state-owned enterprises,the use of credit enhancement measures of state-owned enterprises has a more significant effect on reducing credit bond issuing spread.Compared with high bankruptcy risk enterprises,using credit enhancement measures and irrevocable joint liability guarantee of low bankruptcy risk enterprises has a more significant effect on reducing credit bond issuing spread.Next,this paper empirically analyses the impact of using covenants on the credit bond issuing spread.The empirical results show that the using of covenants expands the issuing spread of credit bond.Further,this paper studies nine kinds of specific covenants: putable,cross-default,change of control rights,prior restraint,adjustment of coupon interest rate,interest deferral,bond deferral,callable,early repayment,and their impact on the credit bond issuing spread.It is found that the use of theseseven typesof covenant: cross-default,change of control rights,prior restraint,adjustment of coupon interest rate,interest deferral,bond deferral,callable,enlarges the issuing spread of credit bond,while the use of other two types of covenants:putable and early repaymentdoes not significantly affect the issuing spread of credit bond.This paper also analyses the impact of usingcovenant on credit bond issuing spread between state-owned enterprises and non-state-owned enterprises,as well as enterprises with low bankruptcy risks and enterprises with high bankruptcy risks.Empirical results show that compared with non-state-owned enterprises,the use of interest deferral and callable covenants of state-owned enterprises has a more significant effect on credit bond issuing spread.Compared with high bankruptcy risk enterprises,using change of control rights covenants of low bankruptcy risk enterprises has a more significant effect on expanding credit bond issuing spread.Compared with low bankruptcy risk enterprises,using adjustment of coupon interest rate covenants of high bankruptcy risk enterprises has a more significant effect on expanding credit bond issuing spread.This paper uses Propensity Score Matching(PSM)method to test the conclusions of using credit enhancement measures and covenants' impact on credit bond issuing spread,The test results show that the conclusions of this paper are robust.Finally,combined with the results of this study,this paper put forward some feasible suggestions to the government and regulatory authorities,bond issuer and bond investors respectively.