The impacts of liquidity measures and credit rating on corporate bond yield spreads: evidence from China’s green bond market

Abstract

ABSTRACT This article investigates the nexus among the liquidity measures, credit ratings, and the yield spreads of green corporate bonds in China using panel data analysis and the generalized method of moments (GMM). Lower market liquidity, a lower credit rating level, and a shorter issued age are more significant for enlarging the yield spreads of ordinary corporate bonds than those of green corporate bonds. Compared with the AAA credit rating level, the illiquidity ratio, nontrade frequency ratio, zero-trade volume, yield volatility, interest rate margin and issued age have more significant influences on the yield spreads of ordinary corporate bonds than those of green corporate bonds. The liquidity and credit rating have greater differences in affecting the yield spreads of green corporate bonds with different issuance terms.