Business Environment and Bond Credit Ratings: Evidence from China’s Bond Market
Chuntao Li and
Yige Xie
Economic Analysis and Policy, 2025, vol. 87, issue C, 764-789
Abstract:
This paper constructs a city-level business environment index using firm registration data from the State Administration for Industry and Commerce (SAIC) of China. Using bond issuance data from China’s bond market between 2008 and 2021, the study finds that the business environment improves bond credit ratings. To address potential endogeneity concerns, we adopt the merchant guild culture as an instrumental variable and the Streamlining Administration and Delegating Power (SADP) reforms as a quasi-natural experiment. Heterogeneity tests reveal that the impact of the business environment is greater for firms with operational vulnerability and firms in developed regions. It is also stronger for bonds in the energy sector and bonds with greater prefectural green awareness, indicating the supportive role of the business environment in advancing China’s carbon neutrality agenda. Mechanism tests suggest that the business environment enhances bond credit ratings by increasing operating income and profit, reducing information asymmetry, and improving the level of marketization. These findings provide meaningful policy implications for further improving the business environment and achieving carbon neutrality in the bond market.
Keywords: Business Environment; Bond Credit Ratings; Credit Ratings Adjustment; Carbon Neutrality (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:
Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S031359262500270X
Full text for ScienceDirect subscribers only
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:87:y:2025:i:c:p:764-789
DOI: 10.1016/j.eap.2025.06.043
Access Statistics for this article
Economic Analysis and Policy is currently edited by Clevo Wilson
More articles in Economic Analysis and Policy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().