Secondary Bond Yields And Bank Risk-relevant Empirical Analysis

Issuing Subordinated Debt is one way for the commercial banks in our country to get enough capital. Subordinated Debt can also supply with market discipline, that means the investors would require the banks to pay for the bonds at different interest rate due to different risk level, this will press the banks to improve themselves. This paper collected not only the information of Subordinated Debt issued by the commercial banks but also their portfolio structure, designed the liner regression equation to introduce the factors such as rating, performance measures and loan structure and etc. Then OLS was selected to estimate the parameter and significance and test the corelationship between profit and risk, to clarify whether market discipline exists and its power. According to the test result, it is found that market could discipline the bank, but it is far from enough. Based on the conclusion, this paper also analyzed the test result, considering the development of Subordinated Debt at present, then put forward some political suggestions.