Credit ratings and information asymmetry on the Chinese syndicated loan market

- 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.

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.