Bond Financing, Financial Risk And Credit Rating

For a long time，lag of bond financing market has become an important obstaclefactor in raising the proportion of direct financing. At present, state-owned enterprisesis the main body direct financing on our country capital market. On the other hand,many private enterprises and small and medium-sized enterprises has not been able todirect bond financing making effective use of capital market. So, in order to optimizethe structure of our country capital market, improve the proportion of direct financingand develop the bond financing, credit bond financing is a valid method. And from thebond market development experience, credit rating has become the basis for thedevelopment of capital market, bond market. As soon as we check the current capitalmarket performance of credit bonds, clearly the company credit system is not perfect,and the current capital market also need credit bond market development, so there isthe need to take a in-depth research in this aspect. And this is good for findingproblems, for the credit rating industry and for reference to the healthy developmentof the bond market.So, what this paper would study is that if credit rating agencies will focus on thecompany’s financial risk in the ratings. And if so, whick aspects of the company’sfinancial risk would impact on credit rating. This article will reviewed the study ofscholars inland and abroad about the relationship between credit ratings and financialrisk. Through summarizing predecessors’ research results, it could provide a basis forthe research of this paper. Furthermore, this paper would take further research andexploration based on the existing research results, revealing the relationship betweencredit ratings and financial risk.In this paper, the study found that: subject rating and bond rating in China hassignificant correlation with the company size, the types of the first big shareholder,return on net assets, cash ratio and asset-liability ratio, etc. Except to the asset-liabilityratio, other variables have positive correlation with the company subject rating and bond rating. The total assets turnover and non-current liabilities/total liabilities onlytake a positive impact on rating of subject. Debt guarantee only impact the bond rating,when guaranteed bond is higher than unsecured bond rating.