Speaker: Zihui Li (Ph.D. candidate in Accounting, City University of Hong Kong)

Date & Time: Thur. 11^th, December 2025, from 10:00 to 11:30 (Beijing Time)

Place: Tongji Building A2101

ABSTRACT

This study explores whether banks incorporate information embedded in commodity futures prices when assessing borrowers’ creditworthiness. By exploiting the financialization of commodity markets (FCM) beginning in 2004 as an exogenous shock that reduces the informativeness of futures prices, we find that banks impose higher loan spreads on firms more reliant on index commodities in the post-FCM period. Consistent with an information-based mechanism, we document that this impact is larger under three conditions: banks exhibit lower information sophistication, firms provide lower-quality financial reporting, and firms operate in more opaque environments. Our evidence is not driven by exposure to general commodity risk or deterioration in firm performance. Additional analyses reveal that banks also tighten non-price loan terms, and the rise in borrowing costs constrains investment—particularly among bank-dependent firms. Overall, our research underscores the informational role of commodity futures markets in shaping bank loan contracting and highlights the broader economic implications of financialization.

Keywords: financialization of commodity markets; informativeness of futures prices; bank loan contracting; financial reporting; loan spreads