The Research On Chinese Corporate Bond Market Efficiency

At August142007, the China Securities Regulatory Commission issued <thePilot Approach of Corporate Bond Issuance>, marking the corporate bonds started toissue and transact in China. As an important part of China’s bond market, corporatebond market is also the important channel of direct financing, and its efficiencyproblem gains more and more attention from scholars. Improving the efficiency ofcorporate bond market will help to improve its operating efficiency, optimize thecompany’s capital structure, and promote the healthy development of China’s capitalmarket. This paper using a sample of SSE Corporate Bond Index, based on the‘Efficient Market Theory’ and ‘Random Walk Model’, from the qualitative level andquantitative level, analyses the corporate bond market’s efficiency.This paper follows the path from theory to practice. First of all, the paperscientifically defines the connotation of ‘company bonds’ and ‘efficiency’, andestablishes a theoretical framework of information asymmetry theory as thefoundation and the efficient market theory as the foundation stone. Then this paperanalyses the main factors influencing the corporate bond market’s efficiency.Secondly, on the basis of analysis of the current development of China’s corporatebond market, this paper describes the corporate bond market’s efficiency from threeaspects: the price fluctuations, market liquidity and investor structure. Based on thesedata, this paper thinks the corporate bond market’s efficiency is low, and makes abrief analysis of its causes. Thirdly, this paper uses a sample of SSE Corporate BondIndex’s daily and weekly closing price data from January5,2009to2012April6,2010. The numbers of daily and weekly closing price data are790and166. This paperuses three methods of serial correlation test, runs test and variance ratio test toanalyze corporate bonds’ daily and weekly price and return series. The empiricalresults show that the series does not obey a random walk process, and the corporatebond market has not yet reached the weak form efficiency and the test of semi-strongefficiency and strong form efficiency is no longer needed. At last, based on the aboveresearch, this paper puts forward policy suggestions to improve the corporate bondmarket’s efficiency from three aspects of the corporate bond market mechanism, theinformation disclosure system and investor behavior, in order to promote the healthydevelopment of the corporate bond market.