Hypotheses And Verification Of Corporate Bond Risk Under Interest Rate Regulation And Issuer Preference

Corporate bond is an important way in corporate financing to the participants in the market, market risk and credit risk is the most noteworthy risks in the corporate bond market. As the control subjects, government take a tight regulation to the market in order to control these two types of risk, in china, institutional change is almost leaded by government, so, the slow development of corporate bond market in China is mainly a result of the institutional bottleneck in this regard. This fact not only limits the development of the corporate bond market but also is likely to influence market risk and credit risk of the corporate bond market. The "interest rate regulation" and "issuer preference" is the two major characteristics in these supervision of market regulation. Therefore, this paper attempts to study the corporate bond market from the perspective of these two regulatory features. Specifically, the main objective is to start empirical research on the specific performance of the corporate bonds market's market risk and credit risk under the two regulatory features.First of all, the leading part shows a simple review and sum up of the corporate bond market development process is the given. Then, inductions of the performance of the corporate bonds market's market risk and credit risk mainly focus on theoretical analysis on the "interest rate regulation" and "issuer preference" conditions. After that, seven main hypotheses derived from theoretical analysis become the verify objectives of empirical research. Specifically, these hypotheses mainly related to such aspects as:the trend characteristics of the market risk and credit risk, the market risk similarity between corporate bond and treasury bills, significant differences in credit risk of issuers with different ownership and trade. Then, give a brief introduction and comments to the theoretical basis of empirical research methods-risk measurement models. Empirical research is divided into four parts, the first and second is major in market risk, the latter two parts is major in credit risk.The first part of empirical research aims at long-term trend characteristics of the market risk under the "interest rate regulation" condition and the market risk similarity between corporate bond and treasury bills under the "issuer preference" condition. First, we chose GARCH model to estimate dynamic VaR sequences of return series of corporate bond price index and each corporate bonds to test macro and micro market risk. The results show that: The market risk of corporate bond market has gradually rising trend; each Corporate bonds' market risk is independent with their trade characteristics; the market risk similarity between corporate bond and treasury bills is significant in their average VaR quantity, but is not in their long-term trend, corporate bond market risk in China is significantly different with corporate bond in mature markets.The second part of empirical research aims at the characteristics of various types of events'influence effect to market risk under the "interest rate regulation"condition. The sample includes seventeen events, such as:benchmark interest rate adjustment events, deposit reserve ratio adjustment events, bond market regulation adjust events, signal events of Renminbi exchange rate formation mechanism reform, Signal events of global economic crisis. We use improved event analysis method to study these events, The results show that: The events of benchmark interest rate adjustment and deposit reserve ratio adjustment influence market risk in corporate bond market more significantly then other events, the different is in three aspects, firstly, the average excess return' significance in, secondly VaR sequence's significant differences, The change rate of VaR means.The third part of empirical research aims at long-term trend characteristics of credit spreads under the "interest rate regulation"condition and differences in credit risk of issuers with different trade under the "issuer preference" condition. Firstly, we use the bond sample whose issuer is not listed companies to research the credit spreads' trend and term structure, then we use the bond sample whose issuer is listed companies to research the credit different trade issuers' default risk, the individual issuer's default probability and issuers' joint default probability is calculated by KMV model with improved parameter estimation method. The results show that:Credit spread trends and benchmark interest rate adjustment was significant inverse relationship; the term structure of credit spreads is not monotonically increasing with the bond term; Issuers' individual default probability and the portfolio default probability has obvious difference, but they both verify that there is significant difference in trade credit risk.The fourth part of empirical research aims at differences in credit risk of issuers with different ownership under the "issuer preference" condition. We use the credit spreads of bond sample whose issuer is not listed companies and the default probability of bond sample whose issuer is listed companies to research the credit risk. Moreover, we also compare the credit risk of bond with different types of guarantees. The results show that:default probability of the main state-owned enterprises was lower than the ones of non-state-owned enterprises, this phenomenon is more obvious after 2007; The main state-owned enterprises with higher level has lower credit spreads than the lower level ones, but the former ones has higher default probability; Guarantee's characteristics of the bond are not directly related to credit spread.