Information Content of the Geography of Underwriters on Bond Market

ABSTRACT We investigate the impact of underwriter geographic proximity on bond financing costs and default risk using Chinese corporate and enterprise bonds issued between 2009 and 2019. Our study reveals that bonds underwritten by geographically proximate underwriters incur lower financing costs and exhibit reduced default risk. However, this effect is attenuated when underwriters possess a strong reputation or when firms exhibit high transparency, suggesting a substitutive role of these factors in bond pricing. To address endogeneity concerns, we leverage the introduction of high‐speed rail (HSR) as an exogenous shock to perform differences‐in‐difference analysis, and employ instrumental variable and propensity score matching methods. We find that the establishment of HSR networks significantly weakens local underwriters' information advantages, reducing their unique ability to lower bond financing costs. Our results remain robust in various subsamples that exclude first‐tier cities and local government connections.

Authors

Institutions

Publication Details

Journal
Financial Management
Published
2025-03-25
DOI
https://doi.org/10.1111/fima.12495
Citations
3
Primary Topic
Banking stability, regulation, efficiency
Type
article
Field-Weighted Citation Impact
6.62
Controls
|||
ALL TIME
JAN
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEP
OCT
article

Information Content of the Geography of Underwriters on Bond Market

Muzi Chen, Difang Huang, Yan Wang, Xiaoguang Yang
3 citations
Financial Management
Banking stability, regulation, efficiency
6.62
article

Information Content of the Geography of Underwriters on Bond Market

Muzi Chen, Difang Huang, Yan Wang, Xiaoguang Yang
article en
3 citations

Abstract

ABSTRACT We investigate the impact of underwriter geographic proximity on bond financing costs and default risk using Chinese corporate and enterprise bonds issued between 2009 and 2019. Our study reveals that bonds underwritten by geographically proximate underwriters incur lower financing costs and exhibit reduced default risk. However, this effect is attenuated when underwriters possess a strong reputation or when firms exhibit high transparency, suggesting a substitutive role of these factors in bond pricing. To address endogeneity concerns, we leverage the introduction of high‐speed rail (HSR) as an exogenous shock to perform differences‐in‐difference analysis, and employ instrumental variable and propensity score matching methods. We find that the establishment of HSR networks significantly weakens local underwriters' information advantages, reducing their unique ability to lower bond financing costs. Our results remain robust in various subsamples that exclude first‐tier cities and local government connections.

Financial ManagementVol. 54(4)
Central University of Finance and Economics (CN), Sun Yat-sen University (CN), Chinese Academy of Sciences (CN), China University of Petroleum, Beijing (CN), Academy of Mathematics and Systems Science (CN)
Openalex Percentile: Top 4%
Banking stability, regulation, efficiency
6.62
AI Navigator

Ask Laika to Summarize, Analyze, and Connect papers live on the map.

Summarize Papers & Methodologies

Extract key findings, datasets, and comparative methods across publications.

Benchmark Rankings & Visual Analytics

Rank top research institutions, authors, funders, topics, and journals by Field-Weighted Citation Impact (FWCI) and paper volume with instant charts.

Connect Distant Disciplines

Bridge topological clusters on the map to find hidden collaborative intersections.

Information Content of the Geography of Underwriters on Bond Market — Muzi Chen, Difang Huang, et al. · Financial Management (2025) | TGRS Research Map | TGRS