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Corporate climate risk and bond credit spreads

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  • Cang, Han
  • Li, Chao

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.

Suggested Citation

  • Cang, Han & Li, Chao, 2024. "Corporate climate risk and bond credit spreads," Finance Research Letters, Elsevier, vol. 67(PA).
    • Handle: RePEc:eee:finlet:v:67:y:2024:i:pa:s1544612324007712
    DOI: 10.1016/j.frl.2024.105741
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    1. Cheng, Tingting & Qiu, Liping & Lv, Wenya & Yang, Xuanbin & Yang, Gang, 2024. "Economic policy uncertainty and municipal corporate bonds credit spreads: Evidence from China," Finance Research Letters, Elsevier, vol. 69(PB).

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