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The Value of Customers’ Geographic Information in Chinese Corporate Bond Issuance

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  • Yi He
  • Shengdao Gan
  • Liang Xiao

Abstract

Based on a sample from the Chinese corporate bond market, this paper investigates how bond investors respond to customers’ geographic information, including customers’ geographic dispersion and distance. Using the detailed locations of issuing firms and their five main customers, we find a significantly positive relationship between customers’ geographic dispersion/distance and the costs of corporate bonds. This association is robust after both the endogeneity issues are controlled for and a series of robustness checks are conducted. The effects are less pronounced when issuers are audited by Big10 accounting firms and when issuers have high-quality customers. In sum, we apply cluster theory, transaction cost economics and information transfer in risk-asset pricing and find that bondholders demand different risk premiums after gaining access to customers’ geographic information.

Suggested Citation

  • Yi He & Shengdao Gan & Liang Xiao, 2022. "The Value of Customers’ Geographic Information in Chinese Corporate Bond Issuance," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 58(4), pages 907-920, March.
    • Handle: RePEc:mes:emfitr:v:58:y:2022:i:4:p:907-920
    DOI: 10.1080/1540496X.2020.1850439
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    Cited by:

    1. Cao, Feng & Zhang, Xueyan & Yuan, Rongli, 2022. "Do geographically nearby major customers mitigate suppliers’ stock price crash risk?," The British Accounting Review, Elsevier, vol. 54(6).

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