An Analysis Of The Related Factors Of Corporate Debt Difference In China

Since the issuance of the first corporate bond in2007, Chinese corporate bonds market has developed rapidly in the context of the various supportive policies. There is no doubt that issue of corporate bonds’ pricing, especially the issue of credit spreads of corporate bonds, has been a hot topic in academics.This paper is based on the Credit risk decompositiontheory, it involved two parts of credit risk:credit spread and liquidity premium. This paper develops an empirical study on the determinations of the credit yield spread of Chinese corporate bonds from the aspect of the bond characteristics and the issuers’. Besides, this paper classified the empirical study by the credit ratings of the corporate bonds. The final conclusions are as follows:The main factors affecting Chinese corporate bond credit yield spreads are credit rating, time to maturity, liquidity and industry information. The time to maturity has a significant impact on corporate yield spread, implicating that Chinese corporate bond market contains liquidity premium. The corporate bonds with high credit rating tend to have lower credit yield spreads, indicating that Chinese corporate market contains credit spread(credit risk premium).The financial indicators of bond issuers have no significant impact on Chinese corporate bonds’ credit yield spread.Furthermore, this article develops four multiple regression models on different kinds of corporate bonds with different credit ratings. Finally, we find that the correlations that constitute each regression model are totally different. As for corporate bonds with lower credit ratings, the liquidity has a positive correlation with credit yield spread, the situation is on the contrary with the respect of the bonds with higher credit ratings. Besides that, the financial information have an influence on the credit yield spread significantly in the respect of lower ratings’ bonds, while it do not works for higher ratings’bonds. All of these differences conclude that the pricing mechanism of our corporate bonds is irrational.