Credit ratings and information asymmetry on the Chinese syndicated loan market

We study whether local credit ratings alleviate information asymmetry inherent in the fast growing Chinese market by examining the syndicate structure of loans issued by Chinese borrowers in 2003–2011. Despite the common criticism regarding the quality of Chinese credit ratings, our results suggest...

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Bibliographic Details
Published in:China economic review 2014-12, Vol.31, p.1-16
Main Authors: Korkeamäki, Timo, Pöyry, Salla, Suo, Maiju
Format: Article
Language:English
Subjects:
China
Credit
Credit ratings
Information asymmetry
Loans
Markets
Rating
Syndicated loans
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Summary:We study whether local credit ratings alleviate information asymmetry inherent in the fast growing Chinese market by examining the syndicate structure of loans issued by Chinese borrowers in 2003–2011. Despite the common criticism regarding the quality of Chinese credit ratings, our results suggest that they serve an important role in reducing information asymmetry in the market between corporate insiders and outside borrowers. •We document the fast growth of the Chinese syndicated loan market 2003–2011.•We study how local credit ratings in alleviating information asymmetry in China.•Loan syndicates are larger when the borrower has a Chinese credit rating.
ISSN:1043-951X
1873-7781
DOI:10.1016/j.chieco.2014.08.001