Study On The Influencing Factors Of Bond Default And Its Economic Consequences

Providing financial support services for the real economy is the most critical function of the securities market.Promoting the healthy and orderly development of the securities market and improving the financial support capacity of the securities market for the real economy has always been the focus of the work of the Chinese government.Bond financing is no need to go through cumbersome,lengthy,and difficult listing procedures,low financing costs,and all companies can participate in the existence of advantages.This makes bond financing increasingly popular with companies and has become an important direct financing method for companies.There is no need to go through the cumbersome,long and difficult listing procedures,the financing cost is low,all enterprises can participate in and so on.Bond financing is increasingly favored by enterprises,and has become an important means of direct financing.The importance of direct financing function in Chinese bond market is becoming more and more prominent.As the second largest bond market in the world,Chinese bond market has been developing and making progress,and the scale of the bond market is becoming larger and larger.By the end of 2020,the stock of Chinese bond market has reached 114.3 trillion yuan,breaking through the one million billion yuan mark.The bond market has made great contributions in providing financial support for the real economy.However,due to the late start of bond market and the backward construction of legal system in China,the bond market in China is far behind the western developed countries,and there are still many areas that need to be improved,and there are still some problems behind the vigorous development of Chinese bond market.The development of Chinese bond market has been greatly hindered by the "rigid cashing" of credit bonds,the government’s "implicit guarantee" expectation,the asymmetric information,the conflict of interest under the payment rating mode of issuers,the uneven credit rating,the lack of effective risk pricing mechanism in the bond market,and the imperfect supporting system construction of the bond market,which affects the full play of the financial support role of Chinese bond market to the real economy.How to repair these shortcomings and promote the healthy development of Chinese bond market so as to give full play to the back-feeding effect of the bond market on the real economy is a problem that Chinese bond market needs to solve urgently.Due to the existence of "rigid cashing" and "implicit guarantee",Chinese credit bonds have always been regarded as an investment tool with high safety factor,so the default risk of bonds has been ignored by all parties.The substantial default of bonds began to cause widespread concern of the whole society until 2014,when the outbreak of "11 Chaori Bond" broke the myth of "rigid cashing" in Chinese bond market.In-depth research on bond defaults is conducive to better preventing credit risks in the bond market,promoting the healthy and orderly development of Chinese bond market,and enhancing the financial support of the bond market to Chinese real economy.However,the existing research still lacks the discussion on the influence factors of bond default in China,and there are few researches on the economic consequences of bond default from the perspective of bond issuers.This provides a good research opportunity for this article.Therefore,based on the broken window theory,incomplete contract theory,information asymmetry theory,principal-agent theory and stakeholder theory,this paper makes an in-depth study of the influencing factors and economic consequences of bond default,and uses the empirical data of bond issuers issuing corporate bonds,firm bonds,medium-term notes,short-term financing bonds and directional instruments from 2014 to 2019,this paper examines the factors influencing bond default,and examines the economic consequences of bond default.The main conclusions are as follows:Firstly,the paper studies the influence of internal and external characteristics of enterprises on bond default.The results show that the more serious the overinvestment,the higher the degree of real earnings management,and the higher the operation risks,the more likely the bond default will occur.Moreover,the lower the level of corporate governance(the worse the quality of information,the higher the agency cost)bond issuers,the higher the probability of bond default;In addition,the more intense the market competition,the higher the probability of bond default,and the level of regional development helps to restrain the occurrence of bond default.Further analysis shows that subjective rating can mitigate the positive impact of overinvestment,real earnings management,double high deposit and loan,operational risk,corporate governance and market competition on bond default,and can promote the restraint effect of regional development level on bond default.After using Heckman’s two-stage estimation and other methods to control the possible endogenous problems,the conclusions of this part of the research still exist.Secondly,the paper studies the impact of bond default on the financing cost of the bond issuers.The results show that there is a significant positive relationship between bond default and future financing cost.Compared with the enterprises without bond default,the future debt financing cost and future bond financing cost of the enterprises with bond default are significantly higher.The positive relationship between bond default and future debt financing cost and future bond financing cost is smaller in the bond issuers with higher credit rating,that is,the corporate credit rating alleviates the impact of bond default on future financing cost.After using Heckman two-stage model,controlling missing variables,changing PSM method,controlling year and industry interaction fixed effect to control the endogenous problem,the conclusion of this part still exists.Cross-sectional analysis shows that,the impact of bond default on future financing cost is more significant in enterprises with more serious tunneling of major shareholders and higher agency cost and private enterprises.Further analysis shows that bond default also increases the borrowing transaction cost,and reduces the commercial credit financing of bond issuers.This part of the research results show that,bond issuers need to bear the cost of dishonesty,because creditors and investors will improve the future capital return,require the bond issuers to pay higher financing costs and higher transaction costs;and the commercial credit financing that bond issuers can obtain in the future will also be reduced.Finally,study the impact of bond defaults on the audit opinions of bond-issuing companies.The results found that there is a negative relationship between bond defaults and audit opinions,indicating that bond default companies are more likely to receive non-standard audit opinions.Among bond issuers with higher subject ratings,the positive relationship between bond defaults and audit opinions is significantly smaller,indicating that subject ratings can alleviate the impact of bond defaults on audit opinions.After adopting the Heckman two-stage model and the kernel matching method to control the endogenous problems,the main research conclusions of this part still exist.The heterogeneity test shows that the positive relationship between bond defaults and audit opinions is more significant in companies where the top shareholders have been hollowed out more severely,as well as in private companies.Further analysis shows that,bond defaults will also lead to increased audit fees for companies.Bond default companies will face higher audit fees,indicating that auditors will require higher risk premiums for bond default companies.The academic contributions of this paper are mainly reflected in:(1)It expands the research perspective of bond default.Based on the empirical data of bond default in China’s credit bond market,this paper discusses the influencing factors of bond default from the internal and external characteristics of enterprises,and expands the research on the influencing factors of bond default.This paper discusses the economic consequences of bond default on bond issuing enterprises from financing costs and audit opinions,which provides a new perspective for the study of the economic consequences of bond default.(2)It provides incremental contributions to research on credit rating quality.In this paper,we find that subjective rating can alleviate the positive relationship between internal and external adverse factors and bond default,and that subjective rating can also alleviate the positive relationship between bond default and financing cost and audit opinion,which supports the view of rating usefulness and provides incremental contribution to the research on credit rating quality.(3)It enriches the research on influencing factors of financing cost.This paper found that after the occurrence of bond defaults creditors ego to protect consciousness also increased,in order to protect their own rights and interests of Banks and other financial institutions to bond defaults enterprise bond issuance requirements of the higher cost of debt financing,for issuance of corporate bond defaults,bond investors would demand more in the future premiums to as punishment,enrich the study of corporate financing costs.(4)The relevant research on audit opinions and influencing factors of audit fees is expanded.In this paper,we find that bond default will make enterprises more likely to receive non-standard audit opinions,which provides a new perspective for the study of audit opinions and audit fees from the perspective of bond default and enrichis the literature on audit governance effect.In addition,this article research is for the issuance of the enterprise,credit rating agencies,bond investors,auditors and regulators to provide the valuable reference:(1)To help issuers understand the influence factors of bond defaults and economic consequences,to strengthen the bond issuance of enterprise credit risk management provides for reference meaning;(2)It has important reference significance for rating agencies to improve the quality of credit rating;(3)It is of great significance for bond investors to prevent bond credit risk,and helps bond investors to understand bond default more intuitively;(4)Provide empirical evidence for audit institutions to play the role of audit supervision and governance;(5)To strengthen the governance of bond default and strengthen the management of bond credit risk provides a theoretical reference,but also for the construction of China’s bond market,further improve the healthy development of China’s bond market to provide a useful reference.