Research On The Impact Of Coco-Bonds Issuance On The Asset Quality Of Rural Commercial Banks In China

With the continuous development of the financial market,the scale of social financing continues to rise,and the risk assets of banks also increase with the growth of loan scale.At the same time,since 2013,the CBIRC has issued new regulations on the Measures for the Management of Capital of Commercial Banks(for Trial Implementation),which impose higher regulatory requirements on the capital of commercial banks.Based on the influence of the above two,the capital replenishment needs of China’s commercial banks have become more urgent.At present,the sources of supplementary regulatory capital of commercial banks in China include preferred shares,convertible bonds,perpetual bonds and Coco-bonds,and in recent years,Coco-bonds have gradually become the primary capital replenishment tool of commercial banks with their unique "write-down clauses",which are used to supplement the secondary capital of commercial banks and improve the capital adequacy ratio.In 2021,the scale of debt financing tools issued by China’s commercial banks will reach 1.98 trillion yuan,of which the issuance amount of Coco-bonds will be 617.073 billion yuan,accounting for31.17%,exceeding the issuance scale of other types of bond financing instruments and becoming the primary capital replenishment tool.Among the secondary capital bond issuing banks,the number of issuers of rural commercial banks accounted for nearly half of the total number of issuers,ranking first.With the continuous development of rural commercial banks and the continuous expansion of future loan scale,it is necessary to study the role of Coco-bonds in the development of agricultural commercial banks.This thesis first summarizes the relevant literature on Coco-bonds at home and abroad and the relevant literature on the impact of Coco-bonds on bank asset quality.Summarizing the previous literature,it is found that Coco-bonds may also have a certain risk incentive effect in improving banks’ ability to cope with risks,but at the same time,there are some factors that restrict the behavior of shareholders and managers.Therefore,based on the previous research,this thesis explores from the perspective of external governance mechanism.Observe whether and how the asset quality of Coco-bonds will be affected with the issuance of Coco-bonds under the condition that the issuing bank’s information is fully disclosed on a regular basis.The data of rural commercial banks that disclosed relevant indicators were collected for empirical analysis,and the correlation between the issuance of Coco-bonds and their asset quality indicators was examined.Then,combined with specific cases,through the changes in the operating data of banks after the issuance of Coco-bonds,the impact of secondary capital bond issuance on shareholders and managers is analyzed,and the transmission mechanism of secondary capital bond issuance affecting asset quality is analyzed from the perspective of external governance mechanism.In the empirical analysis part,the results show that the absolute amount of Coco-bonds issued by rural commercial banks is significantly positively correlated with the asset quality of banks.In the case section,the analysis finds that when the information disclosure is sufficient,the increase in the cumulative amount of Coco-bonds means that the scale of loans expands,and managers face more opportunities for asset allocation decisions.The manager market and capital market have an incentive and constraint effect on managers’ behavior,making managers more cautious in making decisions,and selecting assets with high profitability has a positive effect on asset quality.Another transmission route is the attention of investors in the secondary capital bond product market,which is manifested in the constraint of the non-performing loan ratio on the expected credit spread of the re-issuance of Coco-bonds,which has a positive impact on asset quality.