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- Title
债券契约条款对企业风险承担的治理机制研究: 约束效应还是威慑效应.
- Authors
郭 瑾; 王存峰; 刘志远; 彭 涛
- Abstract
Asset substitution is a major conflict between bondholders and shareholders. After debt financing, the shareholders of bond issuing companies have greater motivation to raise the level of corporate risk-taking, that is, investing more in high-risk projects with the debt funds in order to pursue higher risk premium but at the sacrifice of the bondholder interests. In recent years, debt defaults or debt distresses have occurred frequently in China's bond markets. One of the most important reasons is that the governance of asset substitution behavior is not sufficient, which increases the operating risk of bond issuing companies, and eventually leads to the risk out of control and the debt default. Some foreign studies have already showed that the protection covenants of bond contracts can reduce the possibility of high-risk investment. In addition, compared to the indirect deterrence effect, the direct restraint effect to inhibit corporate risk taking is more significant. However, under China's special background, it is still unclear whether the debt covenants play a governance role in corporate risk-taking. Particularly, compared with that in developed countries, what difference of the governance mechanism exists in China awaits further discussion. Based on hand-collected data of China's corporate bond covenants with classification and evaluation, this paper empirically studies whether the bond contract protection covenants can inhibit the corporate risk-taking and what the governance mechanism of protection covenants is. Results show that the stricter protection covenants mean the lower corporate risk-taking level. The mechanism test shows that the event deterrence and the repayment deterrence covenants have greater inhibition effect on corporate risk-taking than the inhibition effect of restricted payment and restricted investment and financing covenants. This indicates that the inhibition of protection covenants of bond contract on the corporate risk-taking mainly results from the indirect deterrence effect. Further tests show that when the underwriter has a high reputation and the region has a good environment of legal protection, the protection covenants of bond contract have a more significant inhibitory effect on corporate risk-taking behavior, and the regulatory effect of underwriters' reputation and legal mechanism becomes more significant after the rigid payment termination. This proves that with the development of China's bond market, the governance role of bond contract covenants is further enhanced. In conclusion, the bond protection covenants in China can also inhibit the corporate risk-taking. However, different from the results of previous foreign studies, bond protection covenants in China mainly inhibit corporate risk-taking through the indirect deterrence effect rather than the direct restrictive effect. Research findings highlight the important influences of China's special institution background and the features of bond covenants to the governance mechanism. Due to the lack of specific quantitative standards and clear penalty rules for debt defaults, the current restrictive covenants in China are hard to play a governance role. Therefore, the bond regulators should strengthen the relevant guidance and improve the quantitative standards of restrictive covenants. At the same time, the inhibition of the deterrent covenants depends on the effective market mechanism and good legal environment. In particular, with the terminal of rigid payment, the government and regulator should keep promoting the construction of legalization and the development of marketization for the bond markets to improve the credit rating system and enhance the enforcement of corporate bankruptcy liquidation procedure. This will help to strengthen the governance role of bond protection covenants and create a good external environment for the creditor protection.
- Publication
Nankai Business Review, 2022, Vol 25, Issue 5, p148
- ISSN
1008-3448
- Publication type
Article