No abstract

PurposeThis study aims to investigate how opening high-speed railways affects the cost of debt financing based on China's background.Design/methodology/approachUsing panel data on Chinese listed firms from 2008 to 2017, this study constructs a quasi-natural experiment and adopts a difference-in-difference model with multiple time periods to empirically examine the relation between the high-speed railway openings and debt financing cost.FindingsOur results show that opening high-speed railways reduces the cost of debt financing, and this negative correlation is more significant in non-state firms, firms with weaker internal control, and firms that hire non-Big Four auditors. Besides, we explore the impact mechanisms and find that opening high-speed railways improves analyst attention, institutional investor participation, and information disclosure quality, which in turn lowers the cost of debt financing.Research limitations/implicationsThe results imply that the opening of high-speed railways helps to alleviate the information asymmetry and adverse selection between firms and creditors and ultimately reduces the cost of corporate debt financing.Practical implicationsThis paper can inform firms and stakeholders about the impact of opening high-speed railways on debt financing cost: it improves the information environment, reduces the geographical location restrictions of debt financing, ensures the reasonable pricing of corporate debt, and thus promotes the healthy and sound development of the debt market.Originality/valueThis paper provides theoretical support and empirical evidence for the impact of infrastructure construction on the information environment of the debt market in China, which enriches the research on the “high-speed railway economy.” In addition, as an exogenous event, the opening of high-speed railways instantly shortens the time distance between firms and external stakeholders, which gives us a natural environment to conduct empirical research, thus providing a new perspective for financial research on firms' geographical location.

Using data from China's capital market, the intrinsic relationship between political connections and crash risk is tested. Empirical research find that political connections and crash risk are significantly negatively correlated after controlling for the influence of relevant factors; a company with higher proportion of major shareholders, and in company with lower degree of marketization, the negative correlation between political connections and crash risk is more significant; political links of non-foreign funded enterprises is more effective than political connections of foreign funded enterprises in reducing crash risk. The research results indicate that we should exert the positive influence of political connections, reduce the shareholding ratio of major shareholders, accelerate the process of marketization, strengthen corporate governance of non-foreign funded enterprise, and can reduce stock price crash risk, therefore, it will help steady operation of China's capital market.

No abstract