Research On The Influence Of Investor Sentiment On Financing Cost Of Corporate Bonds

Bond financing is one of the most important financing methods for enterprises.It has been a research field that scholars attach great importance to explore what factors affect the financing cost of corporate bonds.In the past,scholars mostly studied the financing cost of bonds from three aspects,that is,macro environment,corporate characteristics and bond characteristics from the perspective of rational individuals and completely effective market,but scholars rarely consider the impact of the stock market on the bond market.With the outbreak of several economic crises and the high volatility of the securities market,people gradually realize that the market is not completely effective,and investors are not completely rational,and arbitrage is limited in the capital market,these factors makes the share price its value have a ‘systematic deviation' with its value,which is reflected in the stock market known as investor sentiment.But the volatility of investor sentiment not only deeply affects the stability of the stock market,but also have impacts on the bond market and the cost of bonds.Therefore,in order to explain this influence mechanism,this paper will study the relationship between investor sentiment and financing cost of corporate bonds from the perspective of behavioral finance.Firstly,this paper reviews the relevant domestic and foreign literature and theoretical research,and collates the research contents ideas,and finds that investor sentiment in stock market has both positive and negative effects on the financing cost of bonds.Secondly,this paper uses principal component analysis to construct the investor sentiment index,and uses credit spreads to estimate the financing cost of bonds.And this paper makes relevant assumptions on the listed corporate bonds of Shanghai and Shenzhen Stock Exchange from 2010 to 2017.This paper builds a multiple regression model,and carries out correlation analysis,multiple collinearity test and robustness test on the model.This paper analyses the relationship between investor sentiment and corporate bond financing cost.At the same time,this paper takes the economic cycle into the scope of the study and analyses the moderating effect of the economic cycle in the relationship of investor sentiment and financing cost of corporate bonds through empirical analysis.The empirical results are as follows: Firstly,Investor sentiment has a significant negative correlation with financing cost of corporate bonds.When the investor sentiment gets higher,the investor's confidence in the securities market is also getting higher,which increases the investment in Securities and the demand for stocks and bonds.When the investor sentiment become extremely high,rational investors will avoid the risk of the stock market by arbitrage,and this will increasing the demand for bonds.These aspects will reduce the financing cost of corporate bonds by influencing the demand for bonds.Secondly,in the period of economic expansion will increase the negative impact of high investor sentiment on financing cost of corporate bonds,that is,the economic cycle plays a moderating effect in the relationship of investor sentiment and financing cost of corporate bonds.This is because the economic cycle will affect the cost of bond financing by influencing the default risk of enterprises and the fluctuation of investor sentiment.Finally,according to the results of this paper's analysis,the paper puts forward relevant suggestions from the three perspectives of regulators,investors and bond issuers,which can provide some reference for relevant departments to maintain the stability of capital market and urge enterprises to make more reasonable financing decisions.The main innovations of this paper are as follows: From the perspective of behavioral finance,this paper studies the impact of investor sentiment on the financing cost of corporate bonds in the stock market,and incorporates the economic cycle into the same research scope,which enriches the relevant theories,and this paper's results provides a new evidence for the linkage between the stock market and the bond market.