Study On The Effectiveness Of The Protective Provisions Of Creditors In China's Bond Market

The bond market is an important part of a country's capital market and plays a major role in meeting the investment and financing needs of the real economy.The state of the bond market usually reflects the perfection of a country's capital market and the level of economic and social development.Compared with the foreign mature and prosperous bond market,the Chinese bond market has started to develop really since the reform and opening-up,and is currently in the initial stage of development.The initial bond market has major problems and shortcomings in the market's basic system construction,market operation mechanism and market structure.Especially in the context of China's special national conditions,the Chinese bond market has always had the problem of “rigid redemption”.The rigid redemption has seriously affected the pricing mechanism of credit risk.As the bond market develops and risks accumulate,it finally ends on March 5,2014.The 11-day debt default event declared the rigid redemption status of the Chinese bond market officially ending.Based on the important market reforms in which rigid redemption is broken,this paper studies the effectiveness of the creditor's protective clauses in the Chinese bond market.The bond market is a direct financing tool,and the bond contract terms are based on the important basis for the buyer and the seller to achieve financial communication.Moreover,due to the information asymmetry between the creditors and the shareholders and the principalagent problem,the introduction of protective clauses can effectively solve these problems.The economic significance of setting the creditor's protective clause in the bond contract is reflected in the effective reduction of the bond financing cost.Therefore,this paper mainly studies the protection level of the creditor's protection clause in the two stages before and after the rigid redemption is broken into the demarcation point.Has there been a substantial change? This paper selects the corporate bonds of listed companies from 2007 to 2018 as a research sample,and divides them into two-stage research samples before and after rigid redemption.By manually collecting the bond prospectus,the data collection of creditor protection clauses of a large corporate bond is carefully constructed.And according to t heir characteristics and the scope of their role,they are divided into four categories of categories that can give creditors rights and constrain the behavior of shareholders.Through empirical research,this paper finds that the creditor's protective clause has significant differences on the bond financing cost in the two stages before and after the rigid redemption breaks.Before the rigid redemption breaks,the creditor's protective clause is only a formal textual clause,which can not effectively reduce the bond financing cost.Therefore,this paper believes that in the special system background of our country,because the market has no bond default precedent,market participants lack the risk of default.The awareness of the practice and how to prevent the risk of default,the creditor's protective clause at this time is just a piece of paper.However,with the first bond default in the bond market,subsequent one-on-one defaults have hit the bond market,and they have also broken the rigid redemption concept that has been existing in many market participants,prompting them to truly understand how to effectively cope with the future through default events.Possible bond defaults,they will pay more attention to the protective provisions that can protect them.Therefore,the creditor's protective clause at this time has a completely different meaning from the previous one.It can truly protect investors through the impact of default events.The terms are no longer the formal terms in the bond prospectus.Therefore,the research in this paper draws the conclusion that after the rigid redemption of the Chinese bond market breaks down,the default shock of the bond market makes the credit risk pricing more reasonable,and also promotes the improvement of marketization efficiency,while improving the risk prevention of investors.Identifying capabilities,they will pay more attention to the creditor's protective provisions that protect their own interests.Therefore,the changes in the market have made the protective clause more effective,indicating that the effectiveness of the creditor's protective clause has been significantly improved.