Does Public Disclosure Crowd Out Private Information Production?

Chen, Jia; Lu, Ruichang

doi:10.2139/ssrn.3294142

Cited by 3 publications

(6 citation statements)

References 40 publications

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“…They interpret the post-TRACE increase in drift as evidence that the implementation of TRACE reduces price informativeness. Their conclusion is different from Badoer and Demiroglu (2019) and Chen and Lu (2019), both of whom find that prices become more informative following the implementation of TRACE.…”

Section: Allocation Of Control Rights In a Transparent Bond Marketmentioning

confidence: 70%

“…phases included issuers with more actively traded bond issues (Bessembinder and Maxwell 2008 The implementation of TRACE led to a significant improvement in price transparency, reduced transaction costs and illiquidity, improved the informativeness of prices, reduced price dispersion, and allowed faster incorporation of new information (e.g., Badoer and Demiroglu 2019;Bessembinder and Maxwell 2008;Chen and Lu 2019;Goldstein and Hotchkiss 2012). We incorporate prior evidence on the impact of TRACE in Section 3.2.…”

Section: The Implementation Of Tracementioning

confidence: 99%

“…Banks can obtain useful information about borrowers from security prices that goes beyond what is known to or disclosed by the borrowers (see, e.g., Bond et al 2012;Chen et al 2007 Chen and Lu (2019) find that bond prices incorporate information faster and approximate random walks more closely. They also show that analyst reports are less informative following transparency enhancement in the bond market.…”

Section: Allocation Of Control Rights In a Transparent Bond Marketmentioning

confidence: 99%

“…A concern with our results is that the mechanism we suggest becomes less credible if our results are primarily driven by Phase IIIB bond issues. This concern is mitigated, however, because Chen and Lu (2019) show that Phase IIIB bond prices become more informative in the post-TRACE regime.…”

Section: Removing the Effect Of Phase Iiib Bond Issuesmentioning

confidence: 99%

“…Importantly, following the implementation of TRACE, bond prices become more efficient and informative (Badoer and Demiroglu 2019;Chen and Lu 2019), credit spreads become better predictors of firms' default risk (Badoer and Demiroglu 2019), and bond price dispersion significantly decreases (Goldstein and Hotchkiss 2012). 3 Thus, following the public dissemination of bond prices under the TRACE system, banks are better informed about borrower fundamentals and thus are less exposed to informational risks when entering into loan contracts.…”

Section: Introductionmentioning

confidence: 99%

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Do banks rely on the bond market for borrower monitoring?

Kyung¹

2020

Preprint

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We find that bond issuers receive bank loans with 11% fewer covenants when the secondary corporate bond market becomes more transparent. The treatment effect is more pronounced when the stock prices are less informative and when the debt-equity agency conflicts are more severe. The evidence suggests that bond market transparency mitigates information risk and enables better market disciplining of moral hazard. As such, private lenders impose fewer contractual restrictions in lending agreements. Treatment firms are also less likely to employ gradually tightening dynamic-threshold covenants as a signaling device. Finally, we find corroborating evidence from new primary bond issues.

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Section: Allocation Of Control Rights In a Transparent Bond Marketmentioning

confidence: 70%

Section: The Implementation Of Tracementioning

confidence: 99%

Section: Allocation Of Control Rights In a Transparent Bond Marketmentioning

confidence: 99%

Section: Removing the Effect Of Phase Iiib Bond Issuesmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 3 more Smart Citations

Do banks rely on the bond market for borrower monitoring?

Kyung¹

2020

Preprint

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ESG Rating Disagreement, Financing Costs, and Enterprise Value

Ren,

Cao,

Shen

2024

Lecture Notes on Data Engineering and Communications Technologies

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The unintended consequence of financial statement comparability: evidence from managerial learning practices

Shen

Xie

2021

Accounting & Finance

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Comparable financial disclosure has well-known benefits but also unintended consequences. This study identifies one unintended consequence of managerial learning. For a large sample of Chinese companies, we find that investment-toprice sensitivity declines with financial statement comparability, indicating that comparability discourages managers from learning from prices. Consistent with the learning explanation, this negative relation is stronger for growth firms and for firms operating in more concentrated industries, where managers rely more on market prices for their investment decisions. We further find a decrease in firm value for these two groups of firms. Overall, we document a negative real effect of comparability.

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Does Public Disclosure Crowd Out Private Information Production?

Cited by 3 publications

References 40 publications

Do banks rely on the bond market for borrower monitoring?

Do banks rely on the bond market for borrower monitoring?

ESG Rating Disagreement, Financing Costs, and Enterprise Value

The unintended consequence of financial statement comparability: evidence from managerial learning practices

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