Margin trading, short selling, and bond yield spread

Gao, Kaijuan; Lin, Wanfa

doi:10.1016/j.cjar.2017.12.001

Cited by 12 publications

(10 citation statements)

References 36 publications

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“…They find for a Taiwanese sample that while director ownership increases default risk, managerial ownership decreases it. This result is in line with Gao and Lin (2018) who also observe managerial ownership reducing credit risk in China, but not with Yen et al (2015), who find a decreasing effect of director ownership on credit risk in Taiwan.…”

Section: Insider Ownershipsupporting

confidence: 83%

The role of internal corporate governance mechanisms on default risk: A systematic review for different institutional settings

Ballester

González‐Urteaga

Martínez

2020

Research in International Business and Finance

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Recent financial downturns, characterized by the significant failures of firms, have revealed the need to control credit risk. Latest literature has shown that weak corporate governance structures are related to high levels of default risk, leading to financial instability. In this context, we aim to summarize the literature that focuses on the role that internal corporate governance plays in the credit risk of firms, specifically considering three corporate governance components: ownership structure, board structure and financial stakeholders' rights and relations. Additionally, we analyse whether the effectiveness of the internal mechanisms depends on particular key factors, especially the institutional setting and the type of mechanisms considered. Finally, new lines of research are identified for future research.

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Section: Insider Ownershipsupporting

confidence: 83%

The role of internal corporate governance mechanisms on default risk: A systematic review for different institutional settings

Ballester

González‐Urteaga

Martínez

2020

Research in International Business and Finance

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“…The link between investor sentiment and Chinese government bonds is regarded by Gao and Lin [22] as a predictive factor of the risk premium. Excess optimism in the stock market will spill over into the bond market, where rational investors will hedge against the risk of a bubble, both of which drive up demand for bonds [56].…”

Section: Literature Reviewmentioning

confidence: 99%

“…Hence, market fluctuation frequently happens, and it is difficult for investor sentiment to be properly guided. Not only do investors make irrational trades in the stock market, but they are also more likely to carry their emotions to other markets [22]. If investor sentiment in the stock market spreads to other markets and causes unexpected fluctuations in China, the pricing and operating efficiency of many financial markets will be damaged.…”

mentioning

confidence: 99%

Can Stock Investor Sentiment Be Contagious in China?

Cai

Ran

2020

Sustainability

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This paper explores the impact of investor sentiment on financial markets in China by taking the quantile causality test. We find that government bond markets, gold markets, and foreign exchange markets are affected by stock investor sentiment, except for in the corporate bond market. In extreme situations, such as excessively optimistic or pessimistic sentiment, these markets will become more vulnerable to suffering from drastic fluctuations. On the contrary, the market return in government bonds, corporate bonds, and foreign exchange also has an influence on stock investor sentiment. Moreover, these links show various asymmetry due to the heterogeneity of different financial markets. Our results are consistent with the noise trader model, which shows the impact of investor sentiment on market returns. Hence, the authorities can sustain the stabilization of financial markets by reducing information asymmetry, guiding the rational sentiment of investors, and increasing effective regulations.Especially in certain extreme pessimistic situations, sentiment in the stock market can lead to drastic fluctuations in other financial markets [15,16], and the authorities cannot maintain market stability and continuity of development. In turn, the performance of these markets is also a remarkable barometer that leads stock investor sentiment to change [17]. Through information in different market environments, external shocks, not only make asset price fluctuate, but also result in stock investors overreacting, and this affects their investment expectations [18]. This bidirectional transmission is regarded as an important factor for the linkage among major financial markets [19]. Hence, investor sentiment plays an important role in the formation of financial market effectiveness. If investor sentiment cannot be reasonably guided, it will be difficult to suppress irrational trading and speculative bubbles and improve market efficiency.Compared with stock markets in developed countries, individual investors account for a large proportion of Chinese stock investors, which makes the whole market more emotional [20]. With a lack of social responsibility and an awareness of sustaining market efficiency, the individual Chinese investor has an underdeveloped investment education and, thus, they often show irrational investment behavior [21]. Hence, market fluctuation frequently happens, and it is difficult for investor sentiment to be properly guided. Not only do investors make irrational trades in the stock market, but they are also more likely to carry their emotions to other markets [22]. If investor sentiment in the stock market spreads to other markets and causes unexpected fluctuations in China, the pricing and operating efficiency of many financial markets will be damaged. As well as the stock market, the gold, bond, and foreign exchange markets are all financial markets with a large scale in China. If such emotional contagion exists in China, investors who excessively ignore the fundamentals will find it difficult to form th...

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“…Firms have severe financing constraints and are overly reliant on bank loans (Shailer & Wang, 2015). To address the underdevelopment of bond financing, the Chinese government has been attempting to take active measures to boost the bond market in recent years (Gao & Lin, 2018 With the booming of the corporate bond market recently, the design of bond contract terms is increasingly imperative. China's unique institutional background, including its high concentration of equity, strong government intervention, and weak investor legal protection, has led to higher agency costs.…”

Section: Institutional Backgrounds Of Corporate Debt In Chinamentioning

confidence: 99%

“…Firms have severe financing constraints and are overly reliant on bank loans (Shailer & Wang, ). To address the underdevelopment of bond financing, the Chinese government has been attempting to take active measures to boost the bond market in recent years (Gao & Lin, ).…”

Section: Background Related Literature and Hypotheses Developmentmentioning

confidence: 99%

Do social ties matter for corporate bond yield spreads? Evidence from China

Qiu

Xiao

2019

Corporate Governance

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Research Question/Issue: This paper studies the effect of top management team (TMT) network centrality on corporate bond yield spreads. In additional analyses, we examine the hierarchical structures of TMT and study which parts contribute to the decrease in bond yield spreads. We also examine the mediating roles (including informed trading probability, media coverage, political ties, financial ties, and bond ratings) and the moderating roles (including marketization and analysts following) in the correlation between TMT network centrality and corporate bond yield spreads.Research Findings/Insights: This paper finds that firms with high TMT network centrality are significantly negatively correlated with lower bond yield spreads. The findings are robust after controlling for a series of sensitivity checks and endogenous concerns. The results of the hierarchical structures show that the decrease of bond spreads is accounted for CFOs' networks and board members' networks, whereas the role of CEOs' networks is not apparent. More importantly, after controlling CEOs'

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Margin trading, short selling, and bond yield spread

Cited by 12 publications

References 36 publications

The role of internal corporate governance mechanisms on default risk: A systematic review for different institutional settings

The role of internal corporate governance mechanisms on default risk: A systematic review for different institutional settings

Can Stock Investor Sentiment Be Contagious in China?

Do social ties matter for corporate bond yield spreads? Evidence from China

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