Margin trading, short selling, and bond yield spread

Kaijuan Gao, Wanfa Lin

Using a quasi-natural experiment, this study examines the effects of margin trading and short selling on bond yield spread in China. It finds that both margin trading and short selling can reduce bond yield spread. Additionally, it finds that margin trading lowers firms' debt ratios and increases their credit ratings, which explains the reduced spread. In other words, margin trading can impact investors' decisions by revealing positive information about a firm. Another finding is that short selling lowers the bond yield spread by decreasing earnings management, suggesting that short selling has an impact on investors' decisions through its effect on corporate governance. Our results suggest that margin trading transmits positive information and short selling impacts firms' policies. These results provide support for future regulations of margin trading and short selling.

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Year of publication:	March 2018
Authors:	Gao, Kaijuan ; Lin, Wanfa
Published in:	China journal of accounting research : CJAR. - Guang dong sheng guang zhou shi : [Verlag nicht ermittelbar], ISSN 2214-1421, ZDB-ID 2548343-2. - Vol. 11.2018, 1, p. 51-70
Subject:	Margin trading \| Short selling \| Bond yield spread \| Information spillover \| Kapitaleinkommen \| Capital income \| Zinsstruktur \| Yield curve \| Leerverkauf \| Anleihe \| Bond \| Wertpapierhandel \| Securities trading \| Öffentliche Anleihe \| Public bond \| Rendite \| Yield \| Unternehmensanleihe \| Corporate bond