What factors affect corporate bond financing costs? -- Taking the corporate bonds of Shanghai and Shenzhen Stock Exchanges of China as an example

Abstract

This paper focuses on the factors which influence the corporate bond financing cost. Based on the complexity and diversity of influencing factors of corporate bond financing costs, this paper discusses them from macro and micro dimensions. This paper discovers that PMI, a macroeconomic indicator, influences bond financing costs positively; the higher the PMI, the more prosperous the economy is, and the more expensive bond financing is. Other macroeconomic variables have varying effects on the financing costs of corporate bonds with various ratings and maturities. Among the individual bond characteristic variables at the micro level, the bond maturity, the issuer's asset liability ratio, and whether the bonds are guaranteed have a positive impact on the bond financing cost, while the bond issuance amount, the issuer's return on equity, and the issuer's corporate nature negatively affect the cost of bond financing. Therefore, the suggestions are: Firstly, for the governments, when PMI increases, it is necessary to introduce corresponding policies to reduce the financing costs of enterprises; Secondly, for the issuer, it should improve its ROE and reduce the asset liability ratio, select the appropriate bond covenants, and consider the macroeconomic situation to choose the appropriate time to issue bonds to reduce financing costs; Thirdly, for bond investors, they should pay attention to macroeconomic fluctuations, study bond covenants and financial indicators.