Stock Price Crash Risk And Corporate Bonds Financing

Stock and Bond Markets are the most important parts of capital market.In recent years,Chinese stock markets has been through much sudden and sharp rise and drop,particularly,stock price crash could cause a great fall of corporate value,and endanger the stability of the financial markets.On the other hand,the rapid development of bond market has become a vital finance channel for corporates due to its strong capital allocation capacity.In August 2008,The China Securities Regulatory Commission(hereinafter referred as "CSRC")formally promulgated the Measures for Corporate Bonds,which marked the real start of China's corporate bonds.In January 2015,the CSRC issued the Corporate Bonds Issue and Exchange Regulation,which included expand the scope of issuers,promote multiple offering styles and simplify the approval process,thus had great impacts on the bond market.In this paper,I selected Chinese listed companies that firstly issued corporate bonds between 2007 and 2016 as my research samples.Firstly,I explored whether the stock price crash risk could influence the bond financing decisions of managers,and analyze the impact path and internal mechanism.Secondly,I researched on the impact of stock price crash risk to investors' judgement,then evaluate whether the higher crash risk could affect the bond contract design.After the empirical analysis,I drew some conclusions as follows.(1)The company with higher stock price crash risk would prefer to issue corporate bond,as the stock price crash risk could lead to a higher cost of equity,to prevent the vanish of corporate value,managers would like to balance the cost of capital by issuing bonds.(2)The higher stock price crash risk would result in a higher credit spread of corporate bonds.(3)The higher stock price crash risk would result in a lower bond term and lower issuance size.(4)The issuance of corporate bond could.significantly reduce the weighted average cost of capital of the enterprise.According to the research conclusions,I propose some suggestions.(1)Regulatory departments should improve the stock market system constructions and guard against systematic risks,guiding to strengthen the information disclosure of listed companies,clear the form of information disclosure,protect the legitimate rights of investors and promote the stock market healthy and orderly development.(2)Develop the bond market,restricts mutually influence with the stock market,to make sure the company to rationalize the proportion of equity financing and debt financing.(3)Listed Companies should improve the level of corporate governance,and attach great importance to the disclosure of information,strengthen the management of daily business activities of effective supervision,reduce conflicts of interest between companies and bond investors.