Extreme climate risks and corporate bond yield spreads: evidence from China

Yanyi Ye, Jingjing Zhu, Bin Li and Xiaoguang Yang

Asia-Pacific Journal of Accounting & Economics, 2024, vol. 31, issue 5, 697-717

Abstract: This paper examines the relationship between extreme climate risks and offering yield spreads using a comprehensive dataset of Chinese corporate bonds issued by publicly listed firms from 2014 to 2020. We find that extreme climate risks are positively associated with firms’ offering yield spreads. This effect is more pronounced for bonds with long maturity, firms in climate-sensitive industries, and firms with lower ROE. Two economic channels are identified to explain the effect of climate risks on offering yield spreads: default risk and investor sentiment. Our results remain robust to a series of robustness tests.

Date: 2024
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DOI: 10.1080/16081625.2023.2257242

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Asia-Pacific Journal of Accounting & Economics is currently edited by Yin-Wong Cheung, Hong Hwang, Jeong-Bon Kim, Shu-Hsing Li and Suresh Radhakrishnan

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