Professor Minggui Yu, Co-Director of the Base, and Professor Wei Deng, Master Rong Zhang from the School of Accounting, Zhongnan University of Economics and Law, has published a collaborative paper titled Overpricing and the High-quality Development of Bond Markets: A Study Based on the New Bookbuilding Regulation" in Journal of Management World.

Journal of Management World is recognized as a Class A+ journal by Zhongnan University of Economics and Law.

Abstract: A high-quality bond market is a key element in building a financial power. However, the phenomenon of underwriters manipulating the bookbuilding process in China's bond issuance is relatively serious, leading to prominent issues of bond underpricing. This not only violates the market-oriented principles of fairness and impartiality but also harms issuance efficiency and market order. This paper takes the New Bookbuilding Rules formally implemented in the interbank market on July 1, 2023, as a quasi-natural experiment. It constructs treatment and control groups based on China's unique bond market structure and uses a difference-in-differences model to examine whether the New Bookbuilding Rules can improve bond underpricing and its mechanism. The results show that the New Bookbuilding Rules significantly reduce the primary-secondary market spread of bonds and effectively alleviate the problem of bond underpricing in the interbank market. Heterogeneity analysis reveals that the improvement effect of the New Bookbuilding Rules on bond underpricing is more pronounced for high-rated bonds, short-term bonds, issuers with high credit ratings and strong profitability, large-scale underwriters, and bank underwriters. Mechanism tests indicate that the New Bookbuilding Rules significantly enhance investors' enthusiasm for participating in inquiry by strengthening bookbuilding management, improve the price discovery function, promote an increase in the issuance spread of the primary bond market, reduce the probability of underwriters extending the bookbuilding deadline, and inhibit underwriters from using overtime strategies to lower investors' subscription interest rates, thereby improving bond underpricing. This paper provides empirical evidence for the effectiveness of China's bond market regulatory policies and reveals its mechanism, which has important policy implications for promoting the high-quality development of the bond market, improving the functions of the capital market, and building a financial power. 

Keywords: Bond Market; Underpricing; New Bookbuilding Rules

Teacher profile

Wei Deng, Professor, School of Accounting, Zhongnan University of Economics and Law. Ph.D. supervisor, Executive Director of the Institute of Financial Management, and "Wenlan Scholar" (Young Scholar). His research focuses on Chinese economic issues in macro finance and corporate finance. As the first author, he has published several academic papers in journals such as Management World, China Economic Quarterly, and Journal of Financial Research. His papers have been fully reprinted by Xinhua Digest and Renmin University Photocopied Materials. He has presided over multiple projects, including the National Social Science Fund Project, the Ministry of Education Humanities and Social Sciences Fund Project, and the Postdoctoral Science Fund Project.

Rong Zhang, Master student, School of Accounting, Zhongnan University of Economics and Law.

Minggui Yu, Professor , Dean of the School of Finance, Zhongnan University of Economics and Law, Ph.D. supervisor, Chief Expert of Major Projects of the National Social Science Fund, and New Century Excellent Talents of the Ministry of Education. Research fields: digital finance, finance and artificial intelligence, corporate finance, finance and innovation. He has published more than 90 academic papers in authoritative domestic and foreign journals, including Economic Research Journal, Management World, World Economy, China Economic Quarterly, Journal of Financial Research, China Industrial Economics, Accounting and Finance, Pacific-Basin Finance Journal, and Economic Modelling. He has presided over more than 10 projects, such as Major Projects of the National Social Science Fund, Key Projects of the National Social Science Fund, and National Natural Science Fund Projects.