High-Speed Rail, Information Asymmetry, and Corporate Loan: Evidence from China

Abstract

The opening of high-speed rail (HSR) has significantly boosted business development in China. This study constructs a credit rationing model based on the theory of information asymmetry, and takes the opening of HSR as a quasi-natural experiment to empirically examine its impact on the investment and financing decisions among firms with different risk profiles using data from A-share listed companies from 2005 to 2019. The findings reveal that HSR opening significantly reduces corporate short-term loans while increasing long-term loans, without affecting loan costs. Low-risk firms, as opposed to high-risk ones, experience notable reductions in short-term loan amounts and extended loan terms post-HSR opening. This is attributed to HSR mitigating information asymmetry between banks and firms. Additionally, HSR opening suppresses "short-term debt for long-term use" behaviors, thereby enhancing investment efficiency and quality. The study empirically supports the idea of leveraging HSR's economic stimulus in terms of firm investment and financing.

Keywords: High-speed rail opening, Information asymmetry, Credit structure, High-quality development