The Study Of Transaction Cost And Efficiency Of Corporate Bonds Market

This thesis is titled with "the study of transaction cost and efficiency of corporate bonds market". It focuses on the efficiency of CB(corporate bonds) market with positive analysis approach, discusses the analyzing results with principles of institution economics so as to find some helpful institutional measures. This article consists of five parts as follows.The 1^st part, "introduction", briefly introduces the title, main viewpoints, framework and researching approaches. Constructing an efficient capital market is key to reform of investing and financing system, which takes the most important position of economic reform. In the unbalanced developing capital market, CB market faces most strictly restriction, resulting in least scale and lower efficiency. So this article takes the efficiency problem of CB market as research target. The main viewpoints concludes that improper institution bring high transaction cost to CB market and result in low efficiency, so institution reform and innovation must be adopted to lower the transaction cost and enhance the efficiency of the market. Guided by institution economics, the article combines the normal analysis and positive analysis approaches to find countermeasures.The 2^nd part, "literature summary and analyzing framework", contributes to the theoretical foundation of the thesis combined with "introduction". The literature summary involves three sections. The 1^st sect is concerned with the capital market efficiency theory. With brief review of the classic efficiency theories of capital market, here brings four commonly criterion to the CB market efficiency, which consist of bonds' price reflecting public information sufficiently, big demand and supply elasticity resulting in good market liquidity, lower transaction cost, and optimizing allocation of capital in CB market. The 2^nd sect is concerned with the principles of institution economics. Based on the analyses of discussion of institution, transaction cost and economic efficiency of overseas and domestic scholars, it holds that institution designation determines the transaction cost and economic efficiency eventually. The 3^rd one is concerned with capital structure approach of newly classic economics, such as MM theorem, supplies us a comparing analyzing object. This approach seems to do nothing with the reality of capital market due to its fatal bug of committing institutional analysis to capital market. The following explanation of institutional scholars to MM theorem just shows us the essentialty of institution.Based on these literature summary, the article brings out the analyzing framework that institution designation of CB market determines the transaction cost and market efficiency eventually, and the only way to enhancing efficiency of CB market is institution reform and innovation to lower the too high transaction cost.The 3^rd part, "positive analysis of CB market efficiency", describes the development process of CB market with five stages of germination, preparatory growth, governance, resuming development and market innovations. Then the part discusses the efficiency oi each components of CB market and makes unitary evaluation. In the primary CB market, there exist few issuers and poor scale due to strict control, gradually abundant bonds types, rigid pricing controls, prolonged tendency of weighted term and formalistic credit evaluation. In the secondary CB market, there also exist less scale and lower liquidity ofbonds, fewer dealing and earning modes, decreasing dealing costs that only work in short term to transaction volume, too brief information exposure, and proper yield levels that reflect the expectation to all information might be acquired. As a whole, the CB market turns to be less efficient.The 4th part, "institution research on the lower efficiency of CB market", analyses the institution designation of primary and secondary CB market, and points out that the higher transaction costs result in lower efficiency. Strictly administrative approve system brings furious quota competition but large market scale and excellent issuers. Rigid pricing system brings no elasticity of bonds' issuing price under current interest rate system, and it seems no difference among different issuers' financing costs. Credit evaluation system doesn't work any more because of the poor market scale and corporate governance abilities. Information exposure system needs further modification, and issuers don't expose their management information in a normative way, which brings high information cost to investors. The market lacks of professional institutional investors and turns to fluctuate frequently. So do the dealing modes. And the current closing repurchase agreement doesn't active the transaction volume either. As a whole, improper institution designation and slow innovation bring too high transaction cost and result in low efficiency of CB market.The 5th part, "institution reform and innovation of CB market", brings forward some reforming and innovating suggestions. As to reform, the administrative approve system of issuance should be replaced with authorizing system, which would cancel quota control and increase the issuing scale. Rigid pricing regulation should turn more flexible, and the coupon rate of long-term bonds floated. It's necessary to carry out compelling information exposure system and heighten violation cost, admonish credit evaluation system and realize different prices of bonds according to their credit scores. As to innovation, it's essential to develop bonds investment funds to foster professional institutional investors, carry out CB indexes to facilitate transactions, develop opening repurchase agreement and OTC market with chief-dealer system.