Professor Jeong-Bon Kim, of the Department of
Accountancy, along with co-authors, has investigated
the relationship between bond market transparency
and stock price crash risk. Utilising the Trade Reporting
and Compliance Engine (TRACE) setting as an
exogenous shock to bond market transparency, the
study finds that improved bond market transparency
leads to lower crash risk in the stock market, consistent with increased information spillover from the bond
market into the stock market. Results from the Path
analysis suggest that bond market transparency
affects stock price crash risk not only directly, but
also indirectly through its effects on management
guidance, analyst forecasts, and media reports. The
study also finds that the mitigation effect of bond
market transparency on stock price crash risk is more
pronounced for firms with higher default risk bonds,
lower institutional stock ownership, and more opaque
financial reporting. Overall, the findings suggest that
increased bond market transparency following TRACE
generates a positive externality in reducing crash risk in
the stock market.
Guan, Yuyan; Kim, Jeong-Bon; Liu, Boluo et al. "Bond
Market Transparency and Stock Price Crash Risk:
Evidence from a Natural Experiment." July 2023; In:
The Accounting Review, Vol. 98, No. 4, p. 143–165.
Reference:
https://publications.aaahq.org/accounting-review/article-abstract/98/4/143/10048/Bond-Market-Transparency-and-Stock-Price-Crash
