The influence of bond prospectus sentiment on credit risk premium

Abstract

Bond prospectus is one of the important information sources for bond investors. This paper innovatively studies the relationship between the sentiment index of bond prospectus and bond risk premium from the perspective of tone. We construct a regression model and further study the moderating effect of the two variables based on 5194 prospectuses of the bonds of Chinese listed companies. The results show that (1) the positive sentiment of corporate bond prospectus has a positive impact on corporate bond credit risk premium; (2) When the bond issuing enterprise is a state-owned enterprise, the positive influence of the positive emotion in the bond offering prospectus text on the credit risk premium will be intensified; (3) The better the operating performance of the bond issuing enterprise, the weaker the positive impact of the positive sentiment of the bond. This paper come to a very interesting conclusion: investors may not believe the prospectus issuer's positive description of the risks because they may have other sources of information.