The price of carbon risk: Evidence from China's bond market
China Journal of Accounting Research
; 15(2), 2022.
Article
in English
| Scopus | ID: covidwho-1872975
ABSTRACT
Using a 2009–2019 sample of Chinese bond issuers, we examine the effect of carbon risk on bond financing costs. Relative to low carbon risk issuers, high carbon risk issuers have substantially larger bond credit spreads, mainly because their credit risk is greater and they invest the funds in non-green projects. This positive relationship is more pronounced for issuers with financing constraints, those not making a green transition and those in cities with stringent environmental regulations. We find a reversed effect during the COVID-19 pandemic. However, China's carbon peak and carbon neutral goals have renewed the focus on carbon risk. Carbon risk also causes bond issuers to scale back production and negatively affects their likelihood of receiving long-term financial support. Our findings suggest that investors consider carbon risk and charge a corresponding risk premium. © 2022 Sun Yat-sen University
Full text:
Available
Collection:
Databases of international organizations
Database:
Scopus
Type of study:
Prognostic study
Language:
English
Journal:
China Journal of Accounting Research
Year:
2022
Document Type:
Article
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