High-speed Rail And Corporate Bond Issuance

In recent years,China has been trying to promote the development of the bond market.The report on the Party’s 20 th National Congress clearly states that we will improve the function of the capital market and increase the proportion of direct financing.As an important direct financing channel,China’s corporate bond market has developed gradually after the continuous reform and improvement of the issuance and trading system.Wind bond data shows that since 2018,the amount of corporate bond issuance has surpassed the amount of stock financing and become one of the most important financing methods in China’s securities market,and the issuance of corporate bonds reaching 3.37 trillion yuan in 2020.However,the problem of information asymmetry between the issuance parties still affects the corporate bond financing.As an important infrastructure that supporting social and economic development,China’s high-speed rail(HSR)has made remarkable achievements.HSR can improve the information environment by compressing time-space distance,alleviating the information asymmetry between stakeholders(e.g.,investors)and issuers,which may affect the issuance of corporate bonds.This thesis first introduces the theoretical basis and institutional background,and then reviews the existing literature from the two research threads of corporate bond issuance,geographical distance and HSR.Using the introduction of HSR as an exogenous shock to information environment and information-acquisition costs,the effects of HSR connection on corporate bond issuance decisions,issuance pricing,issuance efficiency,and bond default have been systematically studied.The main research conclusions are as follows:Firstly,after the introduction of HSR,there are fewer corporate bonds issued by local companies.Specifically,listed companies issue fewer corporate bonds,and non-listed companies issue more.The negative impact of HSR on the issuance of corporate bonds may be due to the investment identification effect caused by the improvement of the information environment.Investors identify the quality of bond-issuance after obtaining sufficient information and reduce the projects with lower quality.Consistent with this logic,this thesis finds that small-size companies and companies with lower credit rating have issued significantly fewer corporate bonds after the introduction of HSR,companies with opaque financial information and fewer analyst following also have significantly fewer corporate bond issuance after HSR introduction.The financing preference effect also affects the corporate bond issuance.This thesis finds that listed companies and state-owned enterprises(SOEs)with more financing channels have significantly fewer corporate bond issuance after the introduction of HSR.Some companies chose long-term bank loans and equity financing following HSR introduction.Further analysis finds that there are more corporate bonds issued by HSR-connected cities,and information environment improvement can promote regional corporate bond issuance.The above evidence shows that through the improvement of the information environment,HSR alleviates the problem of information asymmetry between corporate bond stakeholders and issuers,which helps improve the efficiency of investment decision-making,optimize the selection of financing methods,and promote regional corporate bond issuance.Secondly,after the introduction of HSR,the issuance cost and issuance efficiency of corporate bonds have improved significantly.Theoretically,HSR connection can improve the information environment and reduce the information-acquisition costs of stakeholders such as investors,and thus reducing the information risks and credit risks of corporate bond issuance.The introduction of HSR may reduce the issuance costs of corporate bonds and improve their issuance efficiency.Consistent with this logic,this thesis finds that the yield spread of corporate bond issuance is significantly lower following HSR connection,indicating that HSR significantly reduces the financing costs of corporate bonds in these regions.Further analysis finds that when corporate bonds are issued by private-placement type,non-listed companies,non-listed SOEs,small-size companies,and low-reputation issuers and underwriters,the yieldspread reduction effect of HSR connection is more significant.Due to the sample structure covering a large number of private-placement bonds and non-listed companies,this thesis is the first to find the unique effect of private-placement bonds,non-listed companies and nonlisted SOEs.The introduction of HSR also affects the issuance efficiency of corporate bonds.This thesis finds that the issuance lag of corporate bonds is significantly shorter following HSR introduction,indicating that the issuance efficiency of corporate bonds has been significantly improved.This effect is significantly stronger among SOEs.Thirdly,after the introduction of HSR,the bond default possibility of bond-issued companies has no significant change,but the bond default amount is significantly smaller.Logically,the introduction of HSR can promote investors and other stakeholders to participate in the company through the improvement of the information environment,so as to promote the company to improve its operation and management,improve its profitability,and ultimately reduce the risk of corporate bond default.Based on the above analysis,this thesis finds that the impact of financial distress on the possibility and size of bond default is no longer significant after the introduction of HSR.Further analysis shows that companies that benefit more from the improved information environment,such as the smaller companies,companies that are not tracked by rating agencies,and non-SOEs have significantly weaker impact on bond defaults.In addition,this thesis finds that after the introduction of HSR,the operating performance and financial situation of the bond-issued companies have been significantly improved.This is the first thesis that systematically studies the impact of HSR introduction on corporate bond issuance behavior,issuance cost,issuance efficiency,and bond default.The results show that the improvement of information environment and the reduction of information-acquisition costs can help alleviate the degree of information asymmetry between investors and issuers,thereby improving the efficiency of investment decision-making,optimizing the selection of financing methods,promoting regional corporate bond issuance,and improving the corporate bond issuance cost and efficiency.The improved information environment would also reduce the severity of the impact of bond default.The thesis provides further supplement and development for the theory of information asymmetry of corporate bond issuance.The research conclusions have strong theoretical,political and practical implications for understanding the economic effects of transportation infrastructure and the influencing factors of corporate bond issuance decision,issuance pricing,issuance efficiency and bond default.