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Bank loan information and information asymmetry in the stock market: evidence from China

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  • Yanyi Ye

    (Beijing University of Chemical Technology)

  • Yun Wang

    (University of International Business and Economics)

  • Xiaoguang Yang

    (Chinese Academy of Sciences
    University of Chinese Academy of Sciences)

Abstract

In this study, we use bank loan information to construct proxies for corporate transparency and examine whether these measures reflect information asymmetry in the stock market. Our analysis is based on a novel dataset of stock transactions and bank loans of all publicly listed firms on the Shenzhen Stock Exchange, covering January 2008 to June 2013. We find that firms with outstanding loans have a lower level of information asymmetry in the stock market, whereas firms with defaulted loans have a higher level of asymmetry. Further evidence demonstrates that the effect of loan default on information asymmetry in the stock market is more pronounced when these loans are borrowed from joint-equity commercial banks or multiple banks and when the default occurs under inactive market conditions. Our results remain robust to a series of endogeneity and sensitivity tests and provide suggestive evidence of a close connection between the credit loan and stock markets.

Suggested Citation

  • Yanyi Ye & Yun Wang & Xiaoguang Yang, 2022. "Bank loan information and information asymmetry in the stock market: evidence from China," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-28, December.
    • Handle: RePEc:spr:fininn:v:8:y:2022:i:1:d:10.1186_s40854-022-00367-0
    DOI: 10.1186/s40854-022-00367-0
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