How Do Management Product Valuation Rules Affect Bond Market Efficiency？ Quasi-Natural Experimental Evidence from China's New Asset Management Regulations
JIA Junyi, PAN Huifeng, SONG Minjie
School of Economics, Beijing Technology and Business University; China School of Banking and Finance, University of International Business and Economics; Institute of Chinese Finance Studies, Southwestern University of Finance and Economics
Summary:
In April 2018, the “Guiding Opinions on the Regulation of Asset Management Business of Financial Institutions” (hereinafter referred to as the “New Asset Management Regulations”)was issued, which strictly standardized the valuation rules of asset management products (AMPs) and promoted the transformation of AMPs from an expected return model to a net value-based management model that better reflects the risks of underlying assets. In practice, AMPs are the second largest participants in China's bond market, with a total holding scale accounting for a quarter of the total bond market size. Changes in valuation rules have a significant impact on the operation of the bond market. Previously, China's AMPs adopted an expected return model, using amortized costs to value assets. The product value does not change with the risk of the underlying assets but grows steadily according to the expected rate of return, making asset management institutions and AMP investors lack sensitivity to risks. After the “New Asset Management Regulations”, the proportion of net-value wealth management products has increased from less than 20% to 96.93% by the end of 2023, implying that a large number of bonds valued using amortized cost have shifted to market value measurement. How will this change the risk perception and investment behavior of asset management institutions, and how will it affect bond market liquidity, pricing efficiency, and resource allocation？ Clarifying these issues not only provides a more direct understanding of institutional investors such as AMPs but also helps deepen the theoretical understanding of the operating mechanism of the bond market. Based on credit bond trading and issuance data from May 2017 to May 2019, the study constructs a DID model by leveraging the uniqueness of China's bond “dual market” structure and the policy shock of “New Asset Management Regulations” to analyze the impact of asset management product valuation rules on the bond market. AMPs account for a high proportion, 50%-65%, of the total bond holdings in the Exchange Bond Market, which is more affected and identified as the treated group, while the proportion in the Interbank Bond Market is only 15%-18% and identified as the control group. The research finds that: (1) There is a liquidity creation effect, where the valuation rules of AMPs have increased the bond turnover rate, leading to an additional monthly trading volume of 431.1 billion yuan in the market. However, the new transactions show a “short duration” trend, with the average financing term shortened by 4 months. (2) The spreads between bonds with different ratings have increased, manifested as a 0.22 percentage point widening of the bond pricing spread for each notch decrease in bond ratings. The mechanism analysis shows that it mainly stems from the “risk compensation motive”, where asset management institutions have increased their risk premium requirements for bonds with a lower rating. (3) The enhanced pricing efficiency in the secondary market has a signaling effect on the primary market, promoting funds flows to high-profit and low-debt enterprises, thereby improving resource allocation efficiency. The potential innovations are mainly reflected in the following aspects: Firstly, by studying how the New Regulations on Asset Management affect the bond market, this paper enriches the research on the evaluation of financial regulatory policies, deepening the understanding of the relationship between investor behavior and bond market operation. Secondly, it expands the research on bond market efficiency from the perspective of “rating spreads”, i.e., the spread in risk premiums between low-grade and high-grade bonds, and tests two competing mechanisms by which AMPs' valuation rules widen bond rating spreads: the “safe haven effect” or the “risk compensation motive”. Thirdly, the findings suggest that the valuation rules of AMPs not only improve market liquidity and pricing efficiency but also bring about the costs of short-term preferences and increased volatility, revealing the importance of comprehensively analyzing the benefits and costs of policies. The conclusions have the following policy implications: Firstly, attention should be paid to the vital influence of institutional investors such as AMPs on the capital market. Actively play the price discovery role of AMPs and promote the inclusion of asset management institutions in the scope of market makers. Secondly, in response to the shortening bond financing terms, improve the support mechanism for long-term bond market makers, deepen the innovation and application of debt risk mitigation tools, provide tax incentives or fee reductions for long-term bond investments, and improve performance appraisal of asset management institutions to encourage them to issue more medium-and long-term products. Thirdly, in response to the increased volatility in the bond market, establish liquidity management mechanisms, such as improving early warning of market risks and crisis response mechanisms, clarifying liquidity injection conditions and methods, etc. Set minimum liquidity requirements for asset management institutions to provide initial liquidity buffers in case of massive redemptions. Explore valuation rules that balance “accurately reflecting asset value” and “maintaining the relative stability of net asset value”.
贾君怡, 潘慧峰, 宋敏杰. 资管产品估值规范如何影响债券市场效率？——来自资管新规的证据[J]. 金融研究, 2025, 538(4): 39-56.
JIA Junyi, PAN Huifeng, SONG Minjie. How Do Management Product Valuation Rules Affect Bond Market Efficiency？ Quasi-Natural Experimental Evidence from China's New Asset Management Regulations. Journal of Financial Research, 2025, 538(4): 39-56.
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