Locational effects and the cost of corporate bonds: the role of information

The public yield spreads of bonds vary widely between Chinese provinces/municipalities, with the average for the highest province double that of thelowest one. Although we find that these patterns are mainly attributable toeconomic and legal conditions, locational effects like geographic distance andpublic firm credit ratings also appear to be contributory. We show that theseeffects are induced by different regional informational environments and arerobust to controlling for potential endogenous location choices.