 The effect of compound heat-drought risk on municipal corporate bonds pricing: Evidence from ChinaZiqi Lei, Ping Li and Yujing Wang The North American Journal of Economics and Finance, 2025, vol. 79, issue C Abstract: This paper uses a dynamic copula model to measure compound heat-drought risk and examines its relationship with the issuing spread of China’s municipal corporate bonds. Local government financing vehicles that are more likely to be affected by compound heat-drought risk will pay more costs to issue municipal corporate bonds compared to vehicles unlikely to be affected by compound heat-drought risk. Mechanism analyses find that the compound heat-drought risk damages the solvency of local government financing vehicles and the implicit guarantee ability of local governments. Higher investor attention increases the spread of municipal corporate bonds. We also find that bonds with low credit ratings are more affected by compound heat-drought risk, and environmental actions based on green coverage rates are generally effective in reducing the compound heat-drought risk premium. Furthermore, the compound heat-drought risk has a greater impact on MCBs than extreme heat risk and extreme drought risk. Keywords: Municipal corporate bonds; Compound heat-drought risk; Dynamic copula; Investor attention; Credit ratings (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:79:y:2025:i:c:s1062940825001020 DOI: 10.1016/j.najef.2025.102462 Access Statistics for this article The North American Journal of Economics and Finance is currently edited by Hamid Beladi More articles in The North American Journal of Economics and Finance from Elsevier |
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