| Corporate bonds have become one of the most important ways for companies to obtain external financing since they were formally issued in the Chinese securities market in October 2007.Based on the principal-agent relationship between the bond issuers and the bond investors,there are mainly two kinds of agency conflicts between them: one is adverse selection before bond issuance,and the other is moral hazard after bond issuance.Reasonable bond contracts can effectively alleviate these conflicts and protect the legitimate rights and interests of creditors.However,the degree of information asymmetry is the key factor to affect the rationality of bond contracts.Accordingly,most of the previous literatures on bond contracts focus on the influencing factors.As a product of the development of the securities market,the securities analysts(hereinafter referred to as analysts)play an extremely important role in the external governance environment because of their functions of "information intermediary" and supervision.In China,however,analysts are also known as stock reviewers and stock analysts,which reveals that our analysts are mostly serving in the stock market.Therefore,previous researches on analysts are mainly concentrating on the stock price fluctuation and earnings forecast.So based on information asymmetry,will analyst affect bond contracts in the bond market?With the continuously improvement of the legal system,the awareness of investors to safeguard their rights according to the laws is enhancing.And relevant studies show that the legal litigation will reduce the quality of information disclosure,pass bad news and intensify agency conflicts,which has become one of the major risks of external financing of companies.At the same time,based on the inter disciplinary research tendency of "law and finance",scholars have gradually explored its impact on corporate bond contracts from the perspective of legal system.Then,based on information asymmetry,what impact will the legal proceedings have on bond contracts in the bond market?To construct our sample,we choose the general corporate bonds issued by the listed companies in China over the period of 2007-2017.First,this paper deduces the influence mechanism of analyst following behavior and legal litigation on corporate bond contracts respectively by using the theory of information asymmetry,and then we further study how the legal litigation affects the relationship between the analyst following and the corporate bond contract,and put forward the hypothesizes of research.Second,considering the lag effect of corporate bond contracts,we construct a multivariate regression model and hypothesizes are empirically tested using stata.14 statistical software.Moreover,we also perform the robustness test.This paper will further complement and improve the research about the relationship among external environment,legal environment and corporate bond contract.The empirical results of the study show that: first,more numbers of the analyst following and reporting is associated with the looser corporate bond contracts.In contrast,more numbers of the analyst following is associated with lower bond spreads,longer bond maturity,larger bond amount,and the less possibility of bonds being guaranteed;Second,more numbers and size of law litigation is associated with the more stringent corporate bond contracts.For comparison,more numbers and size of law litigation is associated with the higher bond spreads,shorter bond maturity,smaller bond amount,and the greater possibility of bonds being guaranteed.Third,the legal litigation will weaken the positive impact of analyst following on corporate bond contracts.Through this study,we think that the regulatory authorities should strengthen,standardize and improve the functions of analysts in terms of "information intermediary" and external supervision in the securities market.The government departments should ensure the implementation of relevant laws for investors protection.In the meanwhile,the investors should enhance their awareness of safeguarding their legitimate rights and interests through legal litigation,so as to optimize corporate bond contracts. |
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