Empirical Study On The Influence Of Credit Rating On Chinese Company Bond Issue Market

A mature bond market is fundamental for a country's financial market.It is an important channel through which central bank implements its monetary policy and plays a crucial role in the long-term development of the country's economy.The Chinese bond market used to be relatively small,but it has experienced a rapid growth over the last few years.The size of the Chinese bond market tends to exceed the size of the Chinese equity market.While the scale of China's bonds has greatly increased,there are more and more types of bonds introduced.However,due to China's special economic system,government and financial bonds have been dominant in the market,while corporate bonds are relatively small.Therefore,there is a great potential for the development of Chinese corporate bond market.The issuance of the "Measures for Issuing and Trading Corporate Bonds," in 2015 provides a good opportunity for the development of the bond market.Credit rating is crucial for the bond market.Improving China's credit rating system is one of the most important steps for the future development of Chinese bond market.Establishing a fair and objective credit rating system will play an important role in guiding the investment of the bond market.However,due to the relatively slow development of the bond market in our country and a number of related issues,the credit rating system is often challenged by the public.The credibility has been a controversial topic in the literature.Therefore,this paper empirically investigates the impact of credit rating on the corporate bond market,and explores the impact of China's bond credit rating industry on the bond market.This paper first provides a brief literature review and provides an overview of the current condition of the Chinese credit rating system.Using a sample between May 2015 and December 2017,we use the real interest rate model to study the relationship between bond issuance costs and credit rating.We find that there is a significant negative relationship between the issuance costs and the bond rating,i.e.,higher credit rating tends to lower the costs of issuing bond.Our paper generates implications and provides guidelines for the further development of the China's credit rating industry.