Default Characteristics Of Credit Bond In China

Since 2014,bond defaults have soared in China,with the amount of default bonds and the number of default issuers both increasing.By now,defaulting in our credit bond market has become the norm.In this context,we study on the factors influencing the default of China’s credit bonds and build a model to identify the default risks,which will have practical value for bond investors and regulators in China.First,this paper reviews the development of China’s credit bond market.Then,by observing the spatiotemporal distribution of issuers in default and sorting out reasons for bond default,the characteristics of bond defaults are discovered,and how the default risk is accumulated and developed can be concluded.This article analyzes the risk sources of China’s credit bonds and the factors that affect the default probabilities in depth.On this basis,variables that identifies the default characteristics are constructed,including macroeconomic indicators,industry indicators,market indicators and other financial indicators of the bond.This paper applies the Logit regression model which can achieve high scalability.The research sample includes 102 issuers in default and 2212 issuers who didn’t default in China.The cross-section data before 2 seasons of the payment point is used for regression analysis.In the final model,six explanatory variables were selected: the growth rate of total social financing scale,market implied rating at issue,changes in market implied rating,whether the company is state-owned,return on net assets,and asset-liability ratio.The model passes the significance and robust tests.Based on the empirical results,we believe that:(1)The macroeconomic environment has a significant impact on the default of bond issuers,and an increase in the growth rate of total social financing scale will reduce the default risk of bond issuers significantly.(2)Industry prosperity index cannot explain the default probability of bonds.To analyze the impact of the industry on bond default,it is necessary to examine comprehensive qualitative factors such as the status of enterprises in the industry and industry barriers to entry.(3)The nature of property rights has a significant impact on corporate defaults.The default risk of state-owned enterprises is lower than that of private enterprises.(4)Before an issuer defaults,its financial characteristics will obviously deteriorate.In the analysis of profit cash flow and debt situation,the return on net assets and the asset-liability ratio need to be paid special attention.(5)The market implied rating can reflect the default risk of bonds,and changes in its rating can predict bond defaults too.When monitoring and analyzing the whole market bonds,the Logit model constructed in this paper can effectively identify the default characteristics of bonds.Calculated by the ROC method,the cutoff for the default model is 0.0455.Using this value as the default threshold,the overall predictive ability for whether a bond defaults is high,and the recognition rate of default bonds reaches 81.4%.In conclusion,this model can help bond market participants to find the issuers that need attention,thereby playing a role in preliminary screening of risks.Finally,based on the default characteristics,this paper gives suggestions for both bond investors and regulators,establishing a framework for identifying bond default risks and proposing some improvements in credit supervision.Then,in view of the deficiencies in the research process,future research on bond credit risk is prospected.