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

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  • Yanyi Ye
  • Jingjing Zhu
  • Bin Li
  • Xiaoguang Yang

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.

Suggested Citation

  • Yanyi Ye & Jingjing Zhu & Bin Li & Xiaoguang Yang, 2024. "Extreme climate risks and corporate bond yield spreads: evidence from China," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 31(5), pages 697-717, September.
    • Handle: RePEc:taf:raaexx:v:31:y:2024:i:5:p:697-717
    DOI: 10.1080/16081625.2023.2257242
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