| Existing researches believe that bank interest rate subsidy and continuous credit support are the direct causes of the formation of zombie enterprises.Commercial Banks have the incentive to distort the allocation of credit resources in order to ensure capital adequacy ratio and profit maximization.Therefore,in recent years,the Chinese government has increasingly emphasized the role of the financial market,and the importance of the financial market in capital allocation has been increasing.This raises the question of whether zombie companies are using the bond market to raise money to stay alive.As the financial markets in countries such as the UK and the us are very developed and have high requirements for information disclosure,it is difficult for zombie companies to enter the market,and such problems may not be obvious.But for the Chinese market,due to government subsidies,implicit guarantees and other support,China's zombie enterprises are completely possible to enter the bond market to raise funds.The proportion of these zombie enterprises in the bond market,financing costs and a series of other characteristics,and directly affect the healthy development of China's capital market,we need to carefully discuss.Presently,China's supply-side reform focuses on the disposal of zombie enterprises.Since the end of 2015,various disposal policies for zombie enterprises have been implemented successively,and the government's subsidies and support for zombie enterprises have been significantly weakened,and the operational risks of zombie enterprises have significantly increased.In this context,how does the bond market react to zombie debt financing? Does it distort capital allocation like commercial Banks and continue to meet the financing needs of zombie companies,or does it raise the financing costs of zombie companies and curb the issuance of debt by zombie companies? Combining the exogenous impact brought by the supply-side reform,the study on the change of debt issuance by zombie enterprises can help us better understand the differences between the bond market and commercial Banks in terms of capital allocation mechanism,and rationally adjust financial sturcture.Combined with the era background of supply-side reform,this paper conducts a series of in-depth studies on the debt issuance and financing behavior of zombie enterprises in China,in order to test whether the bond market in China is efficient in capital allocation.On this basis,the paper further compares the characteristics of bank credit financing and bond financing of zombie enterprises,and expounds the theoretical logic behind it.The specific process of this study is as follows:The first is to identify zombie companies in the bond market.In this paper,FN-CHK credit subsidy discrimination method and Continuous Loss Criteria are used to screen the existence of zombie enterprises in China's bond market from 2012 to 2017.The study found that before 2015,due to greater economic downward pressure and loose financial regulation,the proportion of zombie companies in the bond market,the number and total debt issuance of zombie companies rose rapidly.However,with the continuous introduction of various zombie corporate governance policies at the end of 2015,the issuance of zombie corporate bonds has been greatly restricted,and the number and total issuance of zombie corporate bonds has dropped significantly.The research on the characteristics of debt issuance by zombie enterprises in the bond market shows that the interest rate of bond issuance by zombie enterprises is significantly higher than that of non-zombie enterprises,and there is no interest rate subsidy for zombie enterprises.Although the debt credit rating of zombie companies is inflated,such rating inflation has not succeeded in deceiving the market,and investors still demand a high risk premium for zombie companies.This paper studies whether the supply-side reform focusing on the disposal of zombie enterprises has a significant impact on the asset prices of zombie enterprises in the bond market.To be specific,this paper studies two major representative supply-side reform policies of zombie enterprise disposal and market-oriented debt-for-equity swap of state-owned enterprises,and finds that:At the end of 2015,the implementation of the zombie enterprise disposal policy of the state council had a significant impact on the financial market/bond market.The bond market interprets this as a reduction in the level of implicit guarantee behind the bonds of state-owned enterprises,which can be seen in the trading price of the bond market and the interest rate of the new bonds.Among them,the bonds of zombie enterprises of central enterprises have a significantly negative cumulative excess return rate(CAR)in the event window period of [-30,30].The results of multiple regression controlling other factors show that the long-term bond CAR of zombie enterprises is more than 100 basis points lower than that of non-zombie enterprises.Meanwhile,in the year following the event,the interest rate of new bond issuance by zombie companies rose significantly compared with that of non-zombie companies,with short-term and long-term bond financing rates rising by 25 and 50 basis points respectively.Among the 74 enterprises that have announced debt-for-equity swaps with financial data available between 2016 and 2018,there are 19 zombie enterprises,accounting for 25.3 percent.Before the debt-for-equity swap announcement,zombie enterprises have become zombies for 2 years or more,and 8 enterprises have become zombies for more than 4 years;Incident response in capital market,short-term performance/market,bond market for zombie companies and not a zombie/debt-for-equity announcement normal enterprise to carry on the effective distinguish,zombie companies issued bonds in debts into shares,and the 30 days before and after the announcement appeared declined significantly,rather than a zombie companies had significant increase in bond prices.The stock market's reaction to the debt-to-equity swap is generally neutral.According to the research on the changes in the business performance of debt-to-equity enterprises through propensity score matching and DID,it is found that the performance changes of zombie and non-zombie enterprises are significantly different.For non-zombie/normal enterprises,market-oriented debt-to-equity swaps reduce debt pressure,significantly improve profitability,operating efficiency and solvency;For zombie enterprises,in addition to the decline in financial leverage ratio,debt-for-equity swap has not brought about the improvement of profitability,operational efficiency and solvency,or even worsened.Finally,this paper also compares the difference between bond financing and bank credit financing of zombie enterprises.Based on the classical contract theory analysis of the model show that when the financial system in indirect financing by bank credit dominant,the economic slowdown and the increasing uncertainty may distort bank credit resource allocation decisions,for the high risk and low efficiency of zombie companies to provide financial support,and even in some cases will contraction of normal enterprise to leverage.The direct financing market represented by bond financing can allocate funds reasonably according to the enterprise risk and efficiency,without the distortion of resource allocation.The following empirical study found that Banks' credit supply to zombie enterprises of central enterprises was rigid,which was embodied in the fact that the leverage ratio of zombie enterprises did not change significantly before and after the policy was introduced.Banks extended credit to zombie enterprises and made up the gap of their bond financing.Our research on zombie bond financing in this paper verifies that the key to the construction of modern financial system still lies in the construction of modern financial market system.Compared with indirect financing by Banks,financial markets have comparative advantages in improving corporate governance,enhancing information disclosure and strengthening risk management.In order to effectively deal with zombie enterprises and realize automatic liquidation of zombie enterprises,an important breakthrough still lies in the development of direct financing markets such as bonds,and the increase of the proportion of direct financing in the overall debt financing,of course,this also requires the cooperation of commercial Banks. |
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