Corporate climate risk and bond credit spreads

Han Cang and Chao Li

Finance Research Letters, 2024, vol. 67, issue PA

Abstract: This study analyzes the impact of corporate climate risk on bond credit spreads using data from Chinese A-listed companies during 2007–2022. Utilizing textual analysis of annual reports, we construct firm-level climate risk indicators and identify a significant positive association between corporate climate risk and bond credit spreads, particularly for state-owned enterprises and high carbon-emitting companies. Mechanism analysis shows that heightened climate risk leads to higher operational risk and information opacity, indicating that greater investor compensation was required. These results provide new empirical evidence and insights into the factors influencing corporate bond financing costs.

Keywords: Climate risk; Bond credit spreads; Operational risk; Information opacity; Textual analysis (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:67:y:2024:i:pa:s1544612324007712

DOI: 10.1016/j.frl.2024.105741

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