Economic Themes (2013) 51 (3) 1, 425-440
Aleksandar Sevic, Jiali Lu
Abstract: The violation of the long standing sovereign ceiling rule triggers our interests in investigating the determinants of corporate bond yield in the Chinese market. Eight independent variables are selected according to literature review, representing sovereign bond risk, bond characteristics and firm financial ratios. Monthly and quarterly data are employed to run the regression models to explore the effectiveness of sovereign ceiling rule in Chinese market. We find the sovereign ceiling rule is still applicable in China, while there is a positive relationship between liquidity and corporate bond yield, which is inconsistent with widely accepted bond theory and our expectation. Additionally, the coefficients of remaining time to maturity and net income margin are both negative. However, the rest of the independent variables are insignificant.
Keywords: bond market; China; sovereign bond yield
DETERMINANTS OF CORPORATE BOND YIELD IN CHINA
Aleksandar Sevic, Jiali Lu
Abstract: The violation of the long standing sovereign ceiling rule triggers our interests in investigating the determinants of corporate bond yield in the Chinese market. Eight independent variables are selected according to literature review, representing sovereign bond risk, bond characteristics and firm financial ratios. Monthly and quarterly data are employed to run the regression models to explore the effectiveness of sovereign ceiling rule in Chinese market. We find the sovereign ceiling rule is still applicable in China, while there is a positive relationship between liquidity and corporate bond yield, which is inconsistent with widely accepted bond theory and our expectation. Additionally, the coefficients of remaining time to maturity and net income margin are both negative. However, the rest of the independent variables are insignificant.
Keywords: bond market; China; sovereign bond yield
