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Pledgeability and Asset Prices: Evidence from the Chinese Corporate Bond Markets.
- Source :
- Journal of Finance (John Wiley & Sons, Inc.); Oct2023, Vol. 78 Issue 5, p2563-2620, 58p
- Publication Year :
- 2023
-
Abstract
- We provide causal evidence on the value of asset pledgeability by exploiting a unique feature of Chinese corporate bond markets: bonds with identical fundamentals are traded on two segmented markets with different rules for repo transactions. Using a policy shock that rendered AA+ and AA bonds ineligible for repo on one market only, we compare how bond prices changed across markets and rating classes around this event. When the haircut increases from 0% to 100%, bond yields increase by 39 bps to 85 bps. These estimates help us infer the magnitude of the shadow cost of capital in China. [ABSTRACT FROM AUTHOR]
Details
- Language :
- English
- ISSN :
- 00221082
- Volume :
- 78
- Issue :
- 5
- Database :
- Complementary Index
- Journal :
- Journal of Finance (John Wiley & Sons, Inc.)
- Publication Type :
- Academic Journal
- Accession number :
- 171349825
- Full Text :
- https://doi.org/10.1111/jofi.13266