The Role of Bank Competition in Mitigating Information Asymmetry on Green Bond Markets: Evidence from China

Lei Zhou, Paul Wohlfarth and Xiaohong Chen

Emerging Markets Finance and Trade, 2025, vol. 61, issue 12, 3936-3949

Abstract: We propose a model where bank competition impacts green bond returns via investors’ green preferences. We argue that bank competition has the potential to mitigate information asymmetry linked to green investments. We obtain empirical estimates based on GARCH models of daily green bond data for China that cater for conditional volatility and asymmetry of shocks. Our results show that an increase in bank competition increases green bond returns by reducing its variance. These results carry crucial implications for green bond pricing, investor portfolio diversification, and policymaking.

Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:mes:emfitr:v:61:y:2025:i:12:p:3936-3949

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DOI: 10.1080/1540496X.2025.2513350

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