Research On The Determinants Of Credit Spread Of Short-term Financing Bills

On May 23,2005, the People's Bank of China promulgated the "Measures for administration of short-term financing bill" which marked the emergence of short-term financing bill market in our country. In less than 6 years, China has seen rapid development in short-term financing bill market, including market size and function. As an innovative financial tool, short-term financing bill is attracting great interest of more and more financing companies and investors, its issuance scale has gone beyond the scale of corporate bond, and has occupied the first position of the credit products.Purposes of this article is to study the credit spread of short-term financing bills, that can not only help the parties involved in financial market to recognize, measure and price the credit risk of the financial tool better, but also facilitate the development of credit product market especially in short-term financing bill area in China.So far, however, the domestic research on credit spread of financing bills is still in the junior level, this is due to the pricing of credit risk based on structural model or reduced model requires vast amount of data, especially the default data which is still very lacking in China. In addition, most scholars in China use time series regression analysis to study the impact of the macro-economic factors on the credit spread, while ignoring the differences of micro factors. In this paper, we used cross-sectional data of financing bills at issuing point, selected relevant micro factors and indicators by employing structural model and credit rating method, and carried out quantitative analysis to determine the factors which had significant impact on the credit spread.Through the empirical analysis, we got 7 main factors influencing the issuance yield spread of short-term financing bills. In those factors, the credit rating of issuers had most strong explanatory power, while the company's operating leverage is also important. Stock price volatility and credit spreads showed significant positive correlation, but the former had not yet become an important influencing factor. Some profitability and operating indicators'relationship with credit spread were inconsistent with the existing economic principle for which we also made the analysis and explanation. Finally, we gave the relevant policy recommendations on the basis of previous research results.