Research On High Risk Premium Of Public Offering Bond Issued By Private Enterprises In China

In the background of financial disintermediation, interest rate liberalization, finance totalization and internationalization, debt financing of non-financial corporates has achieved huge development. The inter-bank bond market has become the second largest financing channel apart from the bank loan financing for high-quality corporate clients. The financing needs of a large number of high-quality enterprises have gradually shifted to the field of direct financing, and traditional credit relations are gradually weakening. However, an apparent anomaly in the field of corporate bonds at this stage is that the interest rates of bonds issued by corporates with a same credit rating and different forms of ownership differ significantly. Private enterprises are faced with a significant higher issuing rate than state-owned or collective-owned enterprises, thus private enterprises are forced to credit markets or some other alternative financing areas. Financing channels of private enterprises are narrowed, which is bad for the adjustment of their financing structure. However, in the market of debt financing instrument, the risk of default of private-enterprises enterprises is not significantly higher than state-owned enterprises, then why investors distinguish between similar products issued by different corporates with a same credit rating? What causes a high risk premium of private corporate bonds? We treat these problems as our research objects and carry out the empirical research.In this paper, we take the short-term financing bonds issued by listed companies in the market of debt financing instrument during 2005-2015 for example, analyze the impact of ownership form on the initial pricing of short-term financing bonds, and explore the factors that influence high-risk premium of private enterprises from theoretical and empirical point of view respectively. We believe that investors over-worried about the risk of default of private enterprises, credit ratings of state-owned are higher than their true ratings, state-owned enterprises need to adopt more credit-enhancing measures to issue bonds successfully, state-owned enterprises enjoy the privilege of implicit guarantee. All of these cause the issue high-risk premium of public offering bonds issued by private enterprises in the market of debt financing instrument, thus private enterprise are faced with higher financing costs. The results of multiple linear regression model indicate that the ownership form, maturity, credit rating, profitability and other factors have significant impact on issue risk premium of commercial paper. Based on these findings, we also put forward some useful suggestions for rating agencies, corporates, investors and government regulators. This article can provide some effective reference to reduce the financing cost of Chinese private enterprises in the market of debt financing, and thus to promote the reform and development of the market of non-financial corporate debt financing instrument.