An Empirical Study On Lead Underwriters' Reputation And Corporate Bond Financing Costs

With the continuous development of China's capital market,since the first issued corporate bond "07 bond of Yangtze Power" was listed on the Shanghai Stock Exchange in 2007,China's corporate bonds have made considerable progress and become one of the important channels for corporate financing.According to relevant data,in 2016 and 2017,Chinese companies respectively issued 881 and 538 corporate bonds,respectively,and the financing scale reached RMB 12,856.77 million and RMB 5,641.72 million,respectively.From a microscopic perspective,the implementation of corporate bonds has broadened the financing channels of Chinese companies,reduced the company's financing costs,and reduced the high degree of dependence on traditional financing such as banks and trust loans in debt financing;from a macro perspective,corporate bonds have played an indispensable role in perfecting the structure of China's capital market and promoting the healthy development of China's financial market.Increasing the proportion of corporate bond financing in direct financing is the long-term strategic goal of China's capital market development.The level of corporate bond financing costs is related not only to the operational efficiency of the corporate bond market but also to the efficiency of capital market allocation.The level of financing costs is a key issue for the development of corporate bonds.However,with the rapid development of corporate bonds,the risks faced by them have gradually exposed.With the tightening of supervision and the declining bond market in the past 2016,the issuance of corporate bonds has received certain shocks,and the issuance interest rate has continued to rise.In this environment,for the issuers of corporate bonds,how to control the financing costs of bonds is of great significance to the financing strategy of the company.Due to the asymmetric information,the financing costs of the issuer will be affected by the quality of information disclosure.Under the current issuance system of corporate bonds in China,the lead underwriter,as the most important intermediary institution for information disclosure,uses its own professional advantages and mastery of issuance information to integrate the opinions of various professional intermediary agencies and deliver the value information of the issuer to the market.Existing research shows that in the course of a company's IPO,underwriters' reputation can significantly affect the degree of underpricing of IPOs.Based on this,this article aims to study whether the reputation of the lead underwriter in the issuance of corporate bonds in China can also have a certain impact on the financing costs of bonds.Based on the data of 881 corporate bonds issued in the Shanghai Stock Exchange(SSE)and Shenzhen Stock Exchange(SZSE)in 2016,this paper analyzes the status quo of China's corporate bond market,adopts a combination of theoretical analysis and empirical research,proposes research hypotheses,and conducts empirical tests and results analysis.In this paper,the margin between the par interest rate and the interest rate of national debt which issued in the same date with the same term is used as the measure of the cost of financing.At the same time,this article refers to the existing M-W method and uses the amount and the number of the company bond underwritten by the underwriter in 2016.The two are elements taken as the measurement basis,and are assigned the same weight.Finally,the reputation of the underwriter in the issuance of corporate bonds is calculated.The research results in this paper show that the reputation of the lead underwriter can significantly affect the cost of corporate bond financing,and the lead underwriter with higher reputation can bring lower financing costs to the issuer.