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Real effect of bond yield liberalization on corporate investment

Author

Listed:
  • Lin, Xiaowei
  • Wang, Jianyong
  • Zhang, Lingli
  • Chen, Ying

Abstract

This paper provides evidence on the real effect of bond yield liberalization from the perspective of firms’ capital expenditure. Using the break of rigid payment in the Chinese bond market, we find that treated firms’ investments decrease after bond yield liberalization. We argue that firms’ expectation of future financial constraints changes due to the liberalization of bond yield. To verify the mechanism, we present that the effect of bond yield liberalization is more pronounced for firms with severer financial constraints, firms with fewer alternative financing channels, and firms non-state-owned. Overall, we provide a possible dark side of bond market liberalization.

Suggested Citation

  • Lin, Xiaowei & Wang, Jianyong & Zhang, Lingli & Chen, Ying, 2023. "Real effect of bond yield liberalization on corporate investment," Finance Research Letters, Elsevier, vol. 52(C).
    • Handle: RePEc:eee:finlet:v:52:y:2023:i:c:s154461232200575x
    DOI: 10.1016/j.frl.2022.103398
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    References listed on IDEAS

    as
    1. Lin, Xiaowei & Zhang, Qihao & Chen, Aihua & Zhang, Pengdong, 2022. "The Bright Side of Financial Constraint on Corporate Innovation: Evidence from the Chinese Bond Market," Finance Research Letters, Elsevier, vol. 49(C).
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