Research On China's Corporate Bonds Price Influence Factors

As an important financing tool for companies, corporate bonds play a significant role in optimizing the company’s capital structure, rationally allocating public resources, diversifying system risk, improve the market efficiency. The corporate bond developed very late in our country, and the first Chinese corporate bond Changdian Bond started in2007. By the end of2011, the issuance size of the corporate bond in China has reached the amount of300billion yuan, which accounts for about0.52%of China’ GDP. This is far below developed countries’, which is around163%. So China has a huge potential to develop the corporate bond market.For a long time, there is no common standard to price for the corporate bond in our market. How to determine the risk in the corporate bond, price reasonably for it, correctly value the spread between corporate bond return rate and risk-free rate, and investigate which factors may impact the spread, have been paid more and more concerns by scholars and employees in the financial industry.This article which is based on the classical literature and the situation of Chinese market, investigate the factors which can impact the spread between corporate bond and risk-free bond. By building the multiple regression model, we find some meaningful conclusions. The spread between corporate bond and risk-free bond are influenced by the macroeconomic environment significantly. When the economy is prosperous, the corporate value will increase, which can lead to the decrease of default risk, and finally result in the decrease of credit spread.Some proxies such as risk-free rate and exchange rate, can impact the credit spread since they can reflect the macro economy. There exits liquidity effect in mid-term corporate bond in our market. The liquidity in Chinese bond market can may be explained by the underdevelopment of Chinese financial market.