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Article: Equity Short Selling and the Bank Loan Market

TitleEquity Short Selling and the Bank Loan Market
Authors
Issue Date2021
Citation
Journal of Money, Credit and Banking, 2021, Forthcoming How to Cite?
AbstractUsing a difference-in-differences approach, we show that relaxation of short-sale constraints helps to filter out low-quality borrowers from the bank loan market. Treated firms that can still borrow from banks enjoy a lower loan spread, compared with control firms without this sorting mechanism. The results show that such treated borrowers have improved information asymmetry and credit risk, as well as better nonprice contract terms. Overall, equity short selling has a real effect on the bank loan market by weeding out poor-quality borrowers, resulting in a lower cost of private debt for remaining borrower firms.
Persistent Identifierhttp://hdl.handle.net/10722/302013

 

DC FieldValueLanguage
dc.contributor.authorHo, PH-
dc.contributor.authorLin, CY-
dc.contributor.authorLin, TC-
dc.date.accessioned2021-08-21T03:30:18Z-
dc.date.available2021-08-21T03:30:18Z-
dc.date.issued2021-
dc.identifier.citationJournal of Money, Credit and Banking, 2021, Forthcoming-
dc.identifier.urihttp://hdl.handle.net/10722/302013-
dc.description.abstractUsing a difference-in-differences approach, we show that relaxation of short-sale constraints helps to filter out low-quality borrowers from the bank loan market. Treated firms that can still borrow from banks enjoy a lower loan spread, compared with control firms without this sorting mechanism. The results show that such treated borrowers have improved information asymmetry and credit risk, as well as better nonprice contract terms. Overall, equity short selling has a real effect on the bank loan market by weeding out poor-quality borrowers, resulting in a lower cost of private debt for remaining borrower firms.-
dc.languageeng-
dc.relation.ispartofJournal of Money, Credit and Banking-
dc.titleEquity Short Selling and the Bank Loan Market-
dc.typeArticle-
dc.identifier.emailLin, TC: chunlin@hku.hk-
dc.identifier.authorityLin, TC=rp01077-
dc.identifier.doi10.1111/jmcb.12856-
dc.identifier.hkuros324253-
dc.identifier.volumeForthcoming-

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