Determinants Of Credit Spread And Dynamic Process

We analyzed the determinants for the credit spread and change of the spread byfocusing on the Shanghai/Shenzhen Exchange Corporate Bond market, the sampleperiod is from2010/8to2012/12. Based on the monthly panel data, we have thefollowing findingsThe macroeconomics level, the monetary policy does have the largest impact oncredit spread. On the basic yield level, the higher basic yield and sharper slope will leadto lower credit spread, which suits the hypothesis that higher basic yield will bring thecompany higher expected value in the future.For the factors related with company level, only the debt solvency and proficiencyhave significant impact on the credit spread. On the bond level, bond with largerquantity tend to have lower credit spread for the issue of liquidity.As for the determinants for the credit spread change in the year from2010/8to2012/12, we have the following findings.Market volatility has the most significant explanation. On the company level, part ofthe structural model factors do have significant impact, these included the companymarket value volatility and market return.After examine the determinants for the credit spread and credit spread change, wealso study on the credit spread with the credit rating change event.