The geographic distance of underwriter and bond financing costs: Evidence from China

Geographic distance is an objective constraint on companies’ access to underwriters in corporate bond financing, influences capital liquidity. Using Chinese credit bonds issued between 2010 and 2022, this paper examines the mechanism through which underwriter location affects bond financing costs (BFCs). The findings indicate a significant positive relationship between underwriter location and corporate BFCs; the digital transformation of underwriters partially mediates this effect. Furthermore, a strong underwriter reputation, high transparency of corporate information, and a developed regional market can significantly mitigate the positive impact of geographic distance on BFCs. The conclusions contribute to the theoretical understanding of the influence of geographic distance on financial markets and offer relevant policy recommendations for underwriters, bond issuers, and investors.