Research On The Development Of American Corporate Bond Market

This paper may find out the root of the American corporate bond market rapid development through the study of the development process, development status, operation mechanism, and the regulatory system, draw on the successful experience of its development ,then explore the path of China's development on it. The paper is divided into five parts:The first part explained the concepts and theories which related corporate bond. This part summarizes the theories, including the theory of company's capital structure, and the comparison theory between bank loans and corporate bonds. On the basis of these theories, the theoretical foundation for the development of the corporate bond market has been made. The research result shows that the advantage of corporate bonds is an alternative to bank loans. Debt is an essential part of "the best capital structure". Therefore, it shows the necessity and rationality of the corporate bond market in the theoretical sense.The second part introduced the development process and development status of the American corporate bond market. During the War of Independence, in order to cover the huge military expenditure, the United States government issued a large number of government bonds to raise funds. The American bond market starts from then on. The appearance of the American bond market fairly late. Before 1830, only a handful private companies which with prominent status can issue bonds. From 1850 to early 1900, the railway corporation bond takes a dominant position in the corporate bond market. Since the 1970s, the corporate bond market is beginning to show its dominant position. The corporate bond market unprecedented prosperity from the 1990s. After nearly two centuries, The American corporate bond market has been the largest corporate bond market in the world. The corporate bond market has become an important component of the stock market. Now, the American corporate bond market, with large scale, rich variety and advanced technology, is one of the mature bond markets in the world.The third part researched the operation mechanism of American corporation bond market, including the issue, transaction, rating and pricing. The model of issue divides the public-issue and private-issue. Compared with the private-issue, the public-issue more stringent. The issue of the U.S. corporation bonds practices the registration system. In accordance with the principle of openness, provided that they meet the statutory authority to issue the bonds, and in accordance with the statutory procedures for registration, bonds can be issued. The transaction place of U.S. corporation bond market divides in the market place and OTC markets. The majority of American companies transact in the OTC markets. Exchange transactions in the United States accounts for just 3% of all transactions. Maker trading mechanism is the core of the transaction system. This trading mechanism such as buying for selling or selling for buying parties the securities transactions closer together, creates a market for securities transactions .It plays an important role in the entire OTC and enhances the liquidity of the market. U.S. credit rating system has a history of nearly 100 years of development. The rating system has formed by Standard & Poor, Moody and so on. They rate and public. The different credit rating deals with different yield corporate bonds. Complete and accurate market benchmark interest rate curve is an important foundation for the development of the corporate bond market. The common practice of pricing in the U.S.is on the basis of benchmark interest rate -- State Bonds, plus a certain amount of revenue basis point difference to determine the price of corporate bonds. United States Treasury auctioned the regular rolling issue bonds. The interest rate of State Bonds, as the benchmark rate of the corporate bond market, promotes the healthy development of the corporate bond market.The forth part dealt with the regulatory system of American corporate bond market, which including the monitoring system and the legal system. U.S. corporate bond market which through the development of the legal framework, regularize bodies, draw up the implementation details and organizing. There are two main features of the regulatory regime, one is to establish a national regulatory body, and the other is to set up regulations coordinated with the securities market. Regulatory bodies divided into two levels: the first level is the Securities and Exchange Commission; the second level is the federal level, the National Association of Securities Dealers and the stock exchange. U.S. corporate bond market regulatory system of regulations divided into three levels: first, the regulations which enacted by federal government; second, laws enacted by states; third, Stock Exchange and the Securities Industry Association's self-discipline regulations. The federal government's regulations are the trunks in these regulations, which including the "1933 Securities Act," "1934 Securities Exchange Act" and the "1939 Notes Trust Act" and the blue sky laws.The fifth part researched the inspiration of American corporate bond to China. Through the previous analysis, it summarized the main experience of the United States corporate bond market, also concluded the enlightenment for the development of Chinese corporate bond market. After a hundred years of development, there are many advanced experience which worth learning from. The experiences include large market size; strong liquidity; varieties; interest rate forming mechanism perfect; access relatively relaxed; regulatory flexibility; trading systems developed; credit rating system perfect and so on.China'corporate bond market lags seriously. It did not consistent with the theory of the development of the corporate bond market or not conform to the practice of the American corporate bond market, even unable to meet the rapid development of the national economy. Therefore, China should learn from the successful experiences of the United States corporate bond market, explore effective ways to promote the development of the corporate bond market. Specific recommendations include to build a market-oriented system of monitoring; gradually promote corporate bonds issued authorization; steady progress the interest rate pricing which determined by the market mechanism; to improve market transactions; to improve credit rating system.