The Impact Of Default Normalization Of Public Offerings On Bond Prices

As from the “11 Chaori Debt” in China raised the debt market first material breach of the bonds,the bond market opened "Pandora's box".an event of default have been rising default frequency,has been the norm of China raised the debt market.This paper mainly analyzes the impact of default normalization on bond prices and yields from two parts: Theory and demonstration.In the theory part,the factors that affect the bond price,the decision process of the bond price,the path of the impact of the bond default on the bond price and the influence degree of the bond default to the different credit rating are different.The empirical part uses the event study method,selected five most influential default events and debt transaction data from January 2014 to December 2016 as samples.Then use the event study method to calculate the cumulative abnormal return rate curve,and tested by the sign test,the five event abnormal returns were significantly less zero,so as to determine the bond default normalization does have an impact on the bond market price.Through the observation of the cumulative abnormal return curve,we can draw a conclusion: 1.Abnormal return rate is usually significantly decreased in the one or two trading days after the announcement of the breach of contract.2.With respect to private enterprises default,the market for the performance of state-owned enterprises more severe breach.3.Market don't approval deferred payment so much.Finally,based on the empirical results,this paper gives some suggestions from the perspectives of investors,issuers,intermediaries,government and regulators.