WSEAS Transactions on Business and Economics
Print ISSN: 1109-9526, E-ISSN: 2224-2899
Volume 10, 2013
The Influence of Fama-French Factors in Equity and Bond Markets on Corporate Bond Spread
Authors: , , ,
Abstract: We choose corporate weekly transaction data from the end of 2011 to the end of 2012 in Shenzhen Exchange and Shanghai Exchange, and analyze the determinant factors of corporate bond spread, mainly including company size factors in equity market and bond market, book to market ratio factors in equity market and bond market, default risk, term factor and credit rating factors. We find that small companies tend to issue bonds with high yield spreads, but big companies will issue low yield spread bonds. The companies with high book to market ratios will have high yield spread bond, while low book to market ratio corporates will have low yield spread bond. Default risk and term factor are important part in corporate bond spread. Also, the credit ratings are significant in the model. We suggest the China Securities Regulatory Commission encourage small companies to issue bonds and increase the low credit rating bonds.