Research On The Economic Consequences Of Bond Marketization Refor

China’s bond market maintained zero default status for more than 30 years before2014.Even if some corporate bonds were on the verge of redemption,they finally completed redemption with government guarantees or assistance.The long-term zero default phenomenon has made the belief in rigid payment deeply rooted in the bond market,and bond investors generally have strong expectations of rigid payment.Existing studies have found that rigid redemption expectations have distorted the allocation of resources in the bond market,making bond prices unable to reveal the credit risk of the issuer(Luo,2016).In addition,due to the lack of post-test of default events,the fundamentals of bond issuers and credit rating and other information become less important in the bond pricing process,and bond investors are more dependent on property rights and other features representing implicit government guarantees to form rigid payment expectations and thus price bonds(Wang Bosen et al.,2016;Wei Minghai et al.,2017).When China’s bond market has basically taken shape and its scale ranks among the top in the world,the distortion of resource allocation caused by rigid payment expectations has significantly affected the long-term healthy development of China’s bond market and the efficiency of the real economy.In this context,the reform of bond marketization has kicked off,and the first step is the bond defaults.From 2014 when the first private enterprise bond "Chaori Bond" defaulted to the first state-owned enterprise "Tianwei bond" defaulted in 2015,bond default events have gradually become normal in recent years.This indicates that the rigid payment expectations that have been lingering in the bond market for more than 30 years have begun to fade,which is a huge impact and challenge to companies,investors,financial institutions and regulatory authorities.The validity also urgently needs empirical testing.Under the above-mentioned institutional background and urgent practical needs,this paper studies the impact of a major reform in the bond market,the first bond default,on companies and their regions,as well as the "gatekeeper" rating agencies in the capital market.Based on the characteristics of China’s gradual economic system reform and the theory of soft budget constraints,this paper first studies the impact of the occurrence of the first bond default event in the region on the financing behavior of local enterprises;it proves that the regional first bond default weakens the government’s implicit guarantee expectations and strengthens the local market.On the basis of discipline,this paper further studies the real economic consequences of the reform of bond marketization;finally,from the perspective of the impact on the overall rigid payment expectations of the market,this paper takes advantage of China’s first state-owned enterprise bond default,which has a major impact on the rigid payment expectations in the bond market.The event examines the impact of implicit government guarantees on the rating process of rating agencies.The empirical results show that the occurrence of the first bond default event in the region sends a signal to the market that the implicit guarantee of the local government is significantly weakened,thereby enhancing creditors’ risk awareness,strengthening market discipline,and reducing the degree of soft budget constraints of enterprises.The occurrence of the regional first bond default event will significantly increase the credit spread of corporate bonds in the short term,and significantly reduce the corporate market leverage in the long run;this result shows that bond market investors have increased risk awareness after the regional first bond default,the weakening of government implicit guarantee expectations will increase the rate of return required for bonds and further affect the capital structure of enterprises.The group test also verifies that the first bond default in a region has a greater impact on companies with a high degree of government implicit guarantees and high default risks.It also verifies that the first bond default event in a region conveys to the market the weakening of the local government’s implicit guarantee signal.From the perspective of bond issuance,this paper further finds that the weakening of government implicit guarantees under the bond marketization reform increases the possibility of the issuer’s bond issuance failure and increases the bond issuance price as a whole;this result also means that after the first bond default,bond issuance is more market-oriented.On the basis of the above research conclusions,this paper finds that the first bond default in the regional bond market will improve the overall production efficiency of enterprises,which is embodied in the rise of total factor productivity and the improvement of enterprise profitability.The grouping results show that in regions with a high degree of marketization,after the first bond default,the rigid payment begins to break,which can better promote the production efficiency of enterprises.This result is in line with the market promotion theory pointed out by Masahiko Aoki(2005).In regions with a high degree of marketization,both the factor market and the non-stateowned economy are more developed.At this time,the government reduces guarantees or interventions in resource allocation.Letting the market play a better role in resource allocation is more conducive to the improvement and development of the production efficiency of local enterprises;while in regions with a low degree of marketization and lack of a good capital allocation mechanism,the government’s support is not a bad thing.Under the condition that the market system is immature and the market mechanism is not perfect,the government’s policy of cultivating and developing the non-state-owned economy and factor market can supplement the lack of the coordination function of the private sector.In addition,further testing and verification of the improvement channels of enterprise production efficiency,the first bond default in a region optimizes the allocation efficiency of local enterprises’ capital and labor resources;and the reduction of the government’s implicit guarantee also reduces the moral hazard of enterprises and promotes their investment efficiency.Finally,this paper finds that China’s first state-owned enterprise bond default event severely impacted the market’s expectations of government implicit guarantees,making rating agencies reduce the proportion of government implicit guarantee indicators in the rating process.Further empirical tests also show that the reduction of investors’ expectations of government implicit guarantees is conducive to the performance of the rating pricing function;the weakening of government implicit guarantees and the improvement of investors’ risk sensitivity make it more necessary for the private information contained in ratings,while ratings Institutions also have greater incentives to obtain information beyond the implicit government guarantees for investors to make investment decisions.The possible contributions of this paper are as follows: the paper is based on the practical needs of deepening financial system reform in China,combined with China’s special economic system background,to provide new perspectives and evidence for the study of the economic consequences of China’s bond market reform;the quasi-natural experiment used in this paper.It is more likely to obtain evidence of causality with the asymptotic difference-in-difference method,which enriches the relevant research on government implicit guarantees from the regional level;at the same time,this paper enriches and expands the relevant research of local rating agencies in emerging markets by examining the changes of rating standards before and after major changes.On the other hand,this paper will help regulators to better understand the economic consequences of bond marketization reform,and provide a reference for them to formulate relevant policies;it will also help investors to better understand default risks in the context of deepening financial sector reforms cognition.