Empirical Research On The Impact Of Underwriter's Reputation And Credit Enhancement Alternatives On Corporate Bond Issuance Costs

In recent years,with the vigorous development of China's multi-level capital market,the bond financing which belongs to direct financing method gradually become one of the most important methods of financing.This paper focus on the impact of underwriter's reputation and credit enhancement alternatives on corporate bond issuance costs from the perspective of bond issuing companies.First of all,the paper intend to comb the literature from three aspects,the method to evaluate the underwriter's reputation and the impact of underwriter's reputation and credit enhancement alternatives on corporate bond issuance costs.Based on the Market Signal and Financial Certification Theory and the Adverse Selection and Moral Hazard Theory,the paper intend to set hypotheses of the research and to establish the empirical research models.During the stage of empirical analysis,the following conclusions are obtained when the other conditions are controlled: underwriters with high reputation have a significant impact on reducing the issuance costs of corporate bonds.Meanwhile,the signal transmitted by the underwriters with high reputation along with the impact of financial certification can reduce the degree of information asymmetry and therefore it can reduce the issuance costs.The excessive adoption of credit enhancement measures by bond issuing companies will increase the issue rate spread of the bond and increase the overall issuance cost of corporate bonds.Due to moral hazard,the market may over identify credit enhancement measures as a high-risk corporate preference,thus raising the risk premium requirement and increasing the issuance cost.The bond issuers prefer to take credit enhancement measures to increase the bond rating,so as to meet the issuance standards and in order to promote the bond.Enterprises with different attributes should reasonably select relevant measures according to their own characteristics in the process of bond financing.Researches related to underwriters' reputation is mostly concentrated in the field of equity financing.There is little researches on the domestic bond financing industry that considers the influence of underwriters' reputation.Based on the perspective of the issuer's issuance cost,this paper combines bond credit enhancement measures to introduce the underwriter's reputation into the study of bond issuance costs.In view of the research findings above,this paper proposes the following suggestions: When it comes to the bond issuers,choosing high reputation underwriters to undertake bond financing projects and selecting the suitable bond credit enhancement measures as needed are the best choice.When it comes to the bond underwriters,the role of the underwriters in financial certification should be acted properly,and the reputational capital should be cherished.At the same time,they can get the market share by providing the high-quality underwriting services.When it comes to the capital market,the introduction of a new bond credit enhancement system that conforms to the current status of the bond market in China is necessary.Meanwhile,trying to cultivate market-recognized professional credit promotion agencies and bond institutional investors with strong risk identification ability can be beneficial to the market.