Bond Market Transparency and Stock Price Crash Risk : Evidence from a Natural Experiment

Research output: Conference Papers (RGC: 31A, 31B, 32, 33)32_Refereed conference paper (no ISBN/ISSN)peer-review

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Detail(s)

Original languageEnglish
Publication statusPublished - May 2019

Conference

Title42nd Annual Conference of the Canadian Academic Accounting Association (2019 CAAA Annual Conference)
LocationOttawa Marriott Hotel
PlaceCanada
CityOttawa
Period30 May - 1 June 2019

Abstract

Utilizing the Trade Reporting and Compliance Engine (TRACE) implementation setting as an exogenous shock to bond market transparency, we provide strong and reliable evidence that improved bond market transparency contributes to a lower price crash risk in the stock market. Further analysis shows that the accelerated revelation of bad news in the bond market and the spillover of bad news from the bond market into the stock market are two major mechanisms through which bond market transparency reduces stock price crash risk. We also find that the negative effect of bond market transparency on stock price crash risk is more pronounced for bonds with higher default risk and for firms with more opaque information environments. Overall, our findings suggest that increased bond market transparency following the TRACE implementation engenders positive externality in reducing the likelihood of a crash occurrence in the stock market.

Bibliographic Note

Information for this record is supplemented by the author(s) concerned.

Citation Format(s)

Bond Market Transparency and Stock Price Crash Risk : Evidence from a Natural Experiment. / Guan, Yuyan; Kim, Jeong-Bon; Xin, Xiangang; Liu, Boluo.

2019. Paper presented at 42nd Annual Conference of the Canadian Academic Accounting Association (2019 CAAA Annual Conference), Ottawa, Ontario, Canada.

Research output: Conference Papers (RGC: 31A, 31B, 32, 33)32_Refereed conference paper (no ISBN/ISSN)peer-review