Liquidity Premium Of Our Corporate Bonds

Chinese debt market especially corporate bond market is the weak link of Chinese capital market. Thus our government and relevant supervision department put forward to develop the corporate bond market. But even in the developing countries where corporate bonds work well, the liquidity problem of corporate bond market is still not optimistic. The early researchers found that the biggest worry about corporate bond market is not credit risk and interest risk, but the liquidity risk. Especially the outbreak of the subprime mortgage crisis in2007, liquidity problems raise scholars'attention again.This paper first analyzes the corporate bond market liquidity conditions, including the corporate bond financing market and trading market financing, the main issue, the term structure, investors'structure and so on. This essay found after2008, the situation that Chinese corporate bond market is inactive, lacking of liquidity, market depth is low got improvement. But compared with the stock market, our corporate bond market is still lack of liquidity. We then analyze the determinants of corporate bonds liquidity under the financial crisis, found the quality of information disclosure and credit rating are important determinants. There exists low degree information disclosure and the conflicts of interest among rating agencies in Chinese corporate bond market, blocking the development of our market.Apart from its own liquidity, this paper also analyses the liquidity premium of our corporate bond market, we use the time-series model and the panel model for empirical analysis. This study shows that there exists a stable relationship between the liquidity risk and yield spreads of our corporate bonds, thus there exists liquidity premium in our corporate bond market. Through comparing the model explanation before and after the financial crisis, found that under the background of subprime crisis, the problem of liquidity premium is enhanced.Liquidity premium inhibits the promotion of financing efficiency. Thus in the last part of the paper, we give some relevant policy suggestions to improve the market liquidity. Through constructing reasonable trading system, choosing the right degree of information disclosure and credit rating mechanism, we can improve the corporate bond market liquidity.