Factors Affecting Credit Spread Of Subordinated Bonds Of Commercial Banks In China

A healthy and orderly financial market plays a vital role in the prosperity and development of the national economy. The stability of the financial industry, especially to the banking industry, has been the ideal goal for our international and domestic regulatory agencies. In order to regulate the conduct of the commercial banks and to prevent credit risk, regulatory agencies in many countries Formulate strict rules and regulations to constrain the behavior of commercial banks by raising capital. Because of the important role of the commercial bank subordinated debt, it is regarded as a significant means to recapitalize the banks.Since December2003, the first commercial bank subordinated debt is issued by Industrial Bank, the size of Chinese commercial bank subordinated debt market continues to expand, and the role in promoting market efficiency has become even more significant. Therefore, in order to further enhance the important role of subordinated debt, maintaining the stability and development of financial markets, profound study of the theory and practice of Chinese commercial bank subordinated debt become increasingly urgent. The credit spread is not only the basic proposition of financial theory, but also profoundly reflects the credit risk of bonds. Through empirical analysis of impact factors to commercial bank subordinated debt credit spread, we can deepen the understanding of subordinated debt credit risk and improve investors’risk awareness, so as to strengthen the supervision and guidance of the credit risk of the commercial bank subordinated bond market.In the study on the basis of the relevant literature, the article analyzes the influence factors of China’s commercial bank subordinated debt credit spreads, and draw some useful conclusions. The article is divided into five chapters, and the specific content and framework are as follows:The first chapter is an introduction. By the analysis based on the reality background and development process of China’s commercial bank subordinated debt, the article first introduces the realistic background and theoretical significance of the topic. Subsequently, we conducted a systematic combing and summary on related research of commercial bank subordinated debt credit spreads issues. Finally, the article proposed the ideas and methods in research. During the analysis, we use inductive analysis, analogy analysis method and model regression methods to describe and analyze articles problems. At the same time, we are also place a brief description innovation and deficiencies of this article.The second chapter places a brief analysis of the basic meaning of the commercial bank subordinated debt and the basic principles of the subordinated debt credit spreads. This chapter is divided into two parts, the first section introduces the basic connotation and the characteristics of the commercial bank subordinated debt, as well as the basic definitions, the calculation method and the economic nature of the spreads. The second section focused on the pricing mechanism and the decomposition principle of credit spreads. This specific analysis of the commercial bank subordinated debt and credit spreads principle lay a full theoretical support for the below argument.The third chapter discussed the basic factors that affect commercial bank subordinated debt credit spreads. Through the collation of the relevant literature, we sort out the important factors that affect bond credit spreads from both the macro and micro levels. At the macro direction, we summed up the risk-free interest rates, the market exchange rate, stock index, inflation index as well as Treasury rates to the important factor, and make a detailed explanation. At the micro level, respectively, the remaining maturity, scale factors, liquidity, profitability, capital adequacy, asset quality were analyzed and summarized.Chapter4then carries out an empirical analysis of the fundamentals that impact China’s commercial bank subordinated debt credit spreads from the macro and micro levels respectively. At the macro level, we carry out data collation and correlation analysis of the relevant variables, and then build up a multiple regression model based on the time series of subordinated debt credit spread impact factors. On this basis, the long-term dynamic relationship between these variables is discussed in detail. At the micro level, the paper get the commercial bank credit spreads factor model by factor analysis, and then important factors whose weight is relatively high are selected, so as to arrive at a multiple regression equation.Chapter5makes a system summary of influencing factors that affect our commercial bank subordinated debt credit spreads. It also finds that the relative importance risk variables theoretically did not engender material impact on subordinated debt credit spreads. On this conclusion, the article also gives specific analysis and interpretation, and put forward some policy proposals for China’s commercial bank subordinated debt market.The innovative characteristics of this article may include the following two points:The topic of the article is more novel. Commercial bank subordinated debt on the financial market just experienced a short period, the domestic research has yet to be extended and deepened. Based on this situation, from the view of credit spread, this article makes a systematic study of China’s commercial bank subordinated debt, so it possess theoretical and practical significance. In research methods, this paper not only use the analogy analysis to summarize the factors affecting our commercial bank subordinated debt credit spreads, but also employ metering regression model and the statistical analysis method to get empirical analysis. It has also become a major feature of this paper.