An Empirical Study On The Impact Of Liquidity On Credit Spreads In Chinese Corporate Bond Market

A credit spread is the yield spread between a corporate bond and a risk-free bond.It is of great importance to a corporate bond.Finding out what factors may influence credit spreads and how these factors work on the credit spreads are quite meaningful,both theoretically and practically.Besides,the 2008 global financial crisis has caught people's attention to liquidity.Therefore,whether liquidity has an impact on credit spreads becomes a topic worth exploring.In such context,this paper does an empirical study on the impact of both liquidity for bond markets and liquidity for macro economy on credit spreads in Chinese corporate bond market,using data of corporate bonds listed in Shenzhen Stock Exchange from 2012 to 2015.This paper has also studied whether the influences of liquidity on credit spreads are different between bonds issued by state-owned enterprises and bonds issued by non state-owned enterprises.As the research results indicate,both liquidity for bond markets and liquidity for macro economy have significant influences on credit spreads.However,only liquidity for bond markets shows a negative correlation with credit spreads,while liquidity for macro economy has an ambiguous influence on credit spreads.After distinguishing between state-owned enterprises and non state-owned enterprises,it can be found that liquidity has a significantly more negative impact on credit spreads of bonds issued by non state-owned enterprises than on that of bonds issued by state-owned enterprises.In conclusion,this paper not only provides bond investors with some new thinking to help them make investment decisions,but also has guiding significance for policy makers.