Bond Returns Research Articles

CONTRIBUTION OF FOREIGN DEBT, SUKUK, AND BONDS IN INDONESIA'S ECONOMIC GROWTH

Introduction: Indonesia's economic growth experiences unstable conditions from year to year, The study explores their impact on Indonesia's inability to overcome government spending problems by comparing three alternative sources of Indonesian state income to support economic growth, namely foreign debt, Sukuk, and bonds. Methods: The research uses a quantitative approach derived from secondary data in the form of time series data. Foreign debt has a negative effect on Indonesia's economic growth, while sukuk and bonds have a positive effect on Indonesia's economic growth. Results: The simultaneous result is 0.948, meaning that the independent variables (foreign debt, Sukuk, and bonds) have an influence and can be explained by 94.8% of Indonesia's economic growth. Meanwhile, the remaining 5.2% is explained by other variables that are not in this research. This indicates that the foreign debt sukuk and bonds variables have a big influence on Indonesia's economic growth in 2016-2023. Conclusion and suggestion: Foreign debt must be controlled properly by the state so that an economic crisis does not occur in Indonesia. Apart from that, the government must increase the issuance of sukuk and bonds to meet the needs of the deficit APBN.

Analyzing the institutional environment for the issuance of green bonds in Asian countries

Analyzing the institutional environment for the issuance of green bonds in Asian countries

Social media and cost of debt financing: Evidence from stock forum text analysis

AbstractIn this article, we examine whether and how small investors’ social media activity is associated with subsequent bond credit spreads. We use extensive data from posts/comments on social media 30 days before the bond issuance announcement date to identify their implied power and find that the more posts/comments, the smaller the bond issuance spreads. We further find that information quality improvement of posts increases this negative relation between social media activity and bond cost, and that posts directly related to issuers’ fundamentals and/or debt financing drive our main results. Additional tests show that the effect is more salient when there is a greater demand for information quality or when macroeconomic conditions worsen.

Exploring the influence of green bonds on sustainable development through low-carbon financing mobilization

Purpose The purpose of this study to brought new dimensions by inserting market conditions and investor sentiments as independent variable measure their impact on government policy formulation and sustainable development. This research also measures the moderating effective stakeholder engagement. Previous research has focused on demystifying the relationship between green bonds and sustainable development. Design/methodology/approach The analysis part of the research is initiated by factor analysis on the sample size of 100. After the construction of appropriate statements matching the research objective, it was circulated to the respondents of northern region of India. The sampling technique was random in nature through which data analysis on 700 respondents was done. For meeting research objectives present research applies PLS algorithm on the conceptual model framed through review of literature. Findings Out of all independent variables green bond issuance is having statistically significant impact on government policy formulation and investors’ sentiment is having statistically significant impact on sustainable development. Rest all other pairs are statistically insignificant. For an investor, it is necessary to understand that how its sentiments impacts government policy formulation and the health of ecology. Practical implications The research produced results with management implications for practitioners and policy makers that are very significant to the fields of sustainability, green finance and environmental policy. Green bonds also influence government policy, illustrating how green financing may revolutionize environmental laws and regulations. Social implications The social implications of this revelation are considerable. The research enhances knowledge about sustainable development by emphasizing the importance of green bonds in supporting environmentally friendly activities. It allows for transparent reporting, increasing social accountability and reputation while attracting environmentally conscious consumers and fostering community trust. According to the survey, investor sentiment and their enthusiasm for eco-friendly investments may push more money to efforts that are good for society and the environment. This study enhances consciousness about sustainable finance, which has the potential to inspire beneficial social shifts towards a more environmentally and socially equitable future. Originality/value These social ramifications manifest themselves in various socioeconomic and environmental issues of the society in addition to credit and public policy. Second, it is evident that green bond emissions are influencing government policy, demonstrating the power of financial instruments to encourage environmentally beneficial social outcomes by providing officials with an incentive to modify environmental regulations.

Attitudes of Soviet Citizens towards State Loans 1946-1957 after their Cancellation (Based on Personal Source Materials)

The article explores the issue of public attitudes of Soviet citizens towards measures of state financial policy. It examines the sentiments of USSR citizens after the cessation of campaigns related to the issuance of government bonds from 1946 to 1957. The primary sources of information were letters from citizens addressed to Soviet government bodies, as well as diary entries. The study relies on methodological achievements in the “history of emotions.” It was revealed that after the abolition of compulsory subscription campaigns for domestic state loans, the key issue became the repayment of the state debt. It is shown that citizens placed high hopes on the revision of decisions by N. S. Khrushchev after his resignation in 1964. Their attempts to engage in dialogue with authoritative structures and leaders were made repeatedly before the official redemption began, but they did not contribute to a review of earlier decisions until 1974. The study demonstrates that the gradual redemption of bonds in the 1970s-1980s contributed to the establishment of a social compromise, and the practice of mass loans transformed from a measure of current financial and social policy into a subject for historical reflection, discussion, and nostalgia.

Does time-varying risk aversion sentiment matter in the connectedness among Sub-Saharan African bond markets?

Several bond markets in sub-Saharan Africa (SSA) are defaulting due to hiking spreads amid the stressed states introduced by the COVID-19 pandemic and the geopolitical risk tensions from the Russia-Ukraine conflict. Are there controllable factors that drive these markets? We investigate the dynamic connection shared by SSA bond markets and assess the role of investor sentiment measures, focusing on the risk aversion sentiment of international investors. Our results, across different trading horizons, are expected to aid in the formulation of policies for regulating and developing bond markets of emerging economies, particularly SSA. In terms of both return and volatility of SSA bonds, we find risk aversion sentiment an important transmitter of spillover for all investment horizons.

Green bonds: Fueling green innovation or just a fad?

This study investigates the impact of green bond issuance on green innovation and its underlying mechanisms. We find that green bond issuance promotes green innovation, with stronger effects observed in regions with weaker climate regulation, industries exhibiting better environmental performance, and firms with more concentrated ownership. Further analysis reveals that corporate green bonds facilitate the reallocation of investment capital into research and development, effectively mitigating financial constraints on green innovation. This upsurge in green innovation not only enhances financial performance but also yields specific environmental benefits, such as improved environmental investment and ESG performance. These empirical results underscore the significance of green finance in fostering sustainable corporate innovation and advancing climate governance, rather than merely engaging in greenwashing practices.

Shades of green: Unveiling the impact of municipal green bonds on the environment

Green bonds allocate proceeds towards environmentally beneficial projects and sustainable development goals, distinguishing themselves from traditional bonds primarily in the use of proceeds determination. However, investors often find it challenging to assess the carbon reduction potential of these bonds because of the lack of standardised environmental impact reporting. In response to this, our research constructs a unique set of indicators derived from financial and environmental datasets, using multivariate analysis techniques that can accommodate the detection of both linear and non-linear relationships. A novel method combining kernel Principal Component Analysis (kPCA) and Canonical Correlation Analysis (CCA) is applied to detect spatial–temporal cross-correlation in multivariate datasets. This approach handles variable comparability issues and the differential treatment of categorical and numerical variables. A significant finding of this study emerges when this methodology is applied to financial attributes obtained from green bonds issued by municipal agencies (muni bonds), pollution data and environmental (climate) data from nine California counties.The results of the detailed analysis indicate that there is measurable evidence to indicate relationships between green bond issuance and their use of proceeds for pollution reduction efforts. In particular, the results show a clear and interpretable correlation directly linked to the amount of green bond issuance and the effect this is having on pollution reduction, underscoring the tangible impact these financial instruments have on pollution reduction efforts in California.Conversely, when it comes to detecting spatial–temporal relationships between the use of proceeds from green bond issuance and positive climate change effects, this is inconclusive from the current studies’ analysis. It was found that there were weaker cross-correlation relationships observed between climate and green bond financial data set attributes which is perhaps indicative of the fact that climate change effects take a much longer time frame to occur. As such the findings of the analysis in this regard may not indicate that positive climate change effects are not occurring from green bond initiatives, but rather that the ability to measure detectable improvements to climate with regard to the issuance of green bonds is currently limited and will take longer for such effects to manifest in a statistically detectable fashion from the given data. This is particularly likely to be the case given green bonds are only in their infancy as a financial market, having had the earliest issuance only occurring in the last 15-20 years and only substantial growth in the market over the last 10 years. Therefore, this aspect of the research investigating longer-term climate effects with regard to green bond issuance will take longer to develop.

Self-restraint or external supervision: Green bond issuance and greenwashing

How green bond issuance affects firms' greenwashing behavior is an important and unexplored topic. We use the data of Chinese green bond issuance and listed firms to investigate the impact of green bond issuance on firms' greenwashing behavior. We find that green bond issuance significantly inhibits firms' greenwashing behavior. The mechanism test results show that green bond issuance inhibits firms' greenwashing behavior by improving information disclosure quality, and the negative impact of green bond issuance on firms' greenwashing behavior by improving information disclosure quality is greater than the positive impact of alleviating financing constraints on firms' greenwashing behavior. The results of heterogeneity analysis show that the negative impact of green bond issuance on greenwashing behavior is more significant for firms located in regions with a higher level of fintech, political connections, and a higher level of digital transformation. Overall, our empirical evidence suggests that inhibiting firms' greenwashing behavior requires external supervision rather than firms' self-restraint.

Unleashing Fintech’s potential: A catalyst for green bonds issuance

Financial technology, also known as fintech, is transforming daily lives and revolutionising the financial industry. However, there is currently no consensus regarding the effect of fintech on the green bond market. Using novel Chinese data, this study provides robust evidence that fintech development can significantly boost green bond issuance. Further analysis suggests that this promotional effect occurs by empowering intermediary institutions and increasing social environmental awareness. Additionally, we investigate the heterogeneous effect and find that the positive relationship is more pronounced for bonds without high ratings and whose proceeds are not used for refinancing. This effect is also stronger for non-state-owned issuers and in cities connected with High-Speed Railway networks or located in the eastern region of China. These results call for attention from policymakers and security managers to take further notice of fintech utilisation in green finance products.

The role of Japanese corporate governance features in explaining rating differences between global and Japanese rating agencies

Many Japanese bond issuers believe that global credit rating agencies (CRAs)—Moody's and S&P—do not consider the unique corporate governance structure in Japan and assign lower credit ratings even though the “main bank” relationship in Japan can significantly reduce the default risk of these companies. Using 5,814 rated corporate bonds issued by 558 non-financial firms in Japan from 2003 to 2021, we find that local CRAs (R&I and JCR) weigh unique Japanese corporate governance features more heavily and assign higher ratings to Japanese corporate bonds relative to global CRAs. Our results further suggest that the degree of rating differences between local and global CRAs for individual issuers results from systematically different assessments of company-specific risk by these CRAs. Our data also reveal that the importance of main bank ties in Japanese corporate governance remains intact in more recent years, contrary to previous findings.

Sovereign Green Bond Market: Drivers of Yields and Liquidity

The aim of this study is to analyse and assess the yields and liquidity of sovereign green bonds in selected countries and to compare the yields between sovereign green bonds and conventional bonds. Sovereign green bonds are issued by governments to finance environmental and social projects and represent a relatively new and growing asset class. This study seeks to analyse the financial performance of sovereign green bonds by examining yields and liquidity metrics, such as bid–ask spreads. The findings of this research suggest that the yield to maturity (YTM) of sovereign green bonds is influenced by conventional bond return, while conventional sovereign bonds are affected by the financial market return. Furthermore, the results confirm that the liquidity of sovereign green bonds can be explained by bond maturity.

Beyond borders: Assessing the influence of Geopolitical tensions on sovereign risk dynamics

We assess the impact of geopolitical risk and world uncertainty on the sovereign debt risk of 26 European Economies during the period 1984–2022, through the implementation of OLS-Fixed Effects regressions and the Generalized Method of Moments (GMM). We find that geopolitical tensions and global uncertainty in border countries contribute to the rise of European country's sovereign risk as measured by 5- and 10-year Credit Default Swaps (CDS) and bond returns. Moreover, this interconnection is more pronounced during turbulent times such as the subprime crisis. Lastly, we found that geopolitical tensions in other country’ groups such as South America and Asia have a significant impact on the government risks of European countries.

Green Bonds Drive Environmental Performance: Evidences from China

Faced with the urgent challenge of global warming, green bonds play an important role in promoting economic transformation and improving environmental quality by financing environmentally friendly projects. However, the actual effects of green bonds, especially their impact on corporate environmental performance, and the mechanisms behind it, still need to be studied and validated. Based on the time-varying difference-in-differences (DID) model, this study uses 85 Chinese A-share listed companies that have issued green bonds from 2013 to 2022, to study the impact of green bond issuance on corporate environmental performance and the potential mechanisms. The results show that green bonds issuance effectively promotes the improvement of corporate environmental performance; this promotion is more significant for labor-intensive enterprises, larger enterprises, and enterprises with more government subsidies. In terms of the influencing mechanism, R&D investment and green innovation play partial mediating roles, media attention and analyst attention play positive moderating roles. This study further validates and complements the signal theory of green bonds and makes relevant suggestions for the development of green bonds in China.

Do green bond issuers walk the talk? Exploring the alignment between green bond issuance and subsequent green investment

Green bonds are increasingly important as they are closely linked to climate change. However, there is a paucity of empirical knowledge regarding the effectiveness of green bonds in stimulating issuers’ environmental engagement. Employing data of Chinese A-share listed firms during 2010–2021, we examine the impact of green bond issuance on corporate green investment. Our results show that green bonds are effective in supporting green investment, which persists even after a series of robustness tests. The above promotion effect predominantly originates from the supervision and resource effects of green bonds. Additional analysis reveals that repeated issuance of green bonds continues to positively impact green investment. When discussing the heterogeneous purposes of green bonds, we observe that only those issued for green governance purposes resulted in increased green investment. Subsequently, we distinguish the types of green investment, suggesting that green bonds encourage proactive green investment over reactive ones. Moreover, green bonds exert both the industry spillover effect and the performance increment effect. These findings not only provide valuable references for evaluating the effectiveness of green financing policies but also offer instructive implications for green bond issuers, investors, and regulators.

Green Bond Issuance and Corporate Investment and Financing Level: Evidence from Chinese Listed Companies

After the formation of the Chinese green bond market in 2016, it rapidly developed. However, there have been relatively few studies in academia on the financial performance of enterprises after issuing green bonds. In order to promote the development of the green bond market and guide enterprises to improve their investment and financing decisions, this paper uses panel data of A-share listed companies and green bond issuing companies from 2012 to 2022 as samples to study the impact and mechanism of green bond issuance on the investment and financing behavior and maturity mismatch of enterprises. The conclusion drawn is that green bond issuance significantly promotes the improvement of enterprises' investment and financing capabilities, and it also reduces the degree of maturity mismatch for enterprises. This conclusion passes the parallel trends test and remains robust after controlling for the effects of corporate financial asset allocation, industry time trends, and excluding competitive hypotheses. Through mechanism research, it is found that green bonds can improve the level of enterprise investment and financing and the degree of maturity mismatch by reducing the degree of financing constraints on enterprises. They can also enhance enterprise investment and financing capabilities by changing market sentiment and alleviate the maturity mismatch of investment and financing.

Conflict fuels inflation but the tinder lies elsewhere: Eclectic structuralist thoughts in a developing economy context

AbstractDeveloping country inflation is in the headlines again. Mainstream macroeconomics typically ignores the role of conflict while non‐mainstream work tends to ignore macroeconomic constraints. This paper revisits the issue employing a dependent economy framework with eclectic characteristics. Specifically, I explore the mechanisms that propagate both real and monetary sources of inflation in the presence of real wage resistance and distributional conflict. The analysis shows that the inability to pay for subsidies with taxes or bond issuance in a stylized developing economy could create a situation where a relatively small shock leads to sustained and accelerating inflation and a wage‐price spiral, thanks to conflicting claims on income. Subsidies to protect consumers from external price shocks could, similarly, leave a country vulnerable to accelerating wage‐price spirals as the stabilizing relative price effects of a declining foreign asset position are dampened. Distributional conflict thus plays the role of sustainer rather than the primum mobile. Price controls could, in theory, better enable inflation management if these do not result in redistribution toward spenders. Such controls, however, create other trade‐offs for countries facing balance‐of‐payments fragility.

Trading Activity in the Corporate Bond Market: A SAD Tale of Macro-Announcements and Behavioral Seasonality?

This study investigates the determinants of trading activity in the U.S. corporate bond market, focusing on the effects of Seasonal Affective Disorder (SAD) and macroeconomic announcements. Employing the General-to-Specific (Gets) Autometrics methodology, we identify distinct behavioral responses between retail and institutional investors to SAD, noting a significant impact on retail trading volumes but not on institutional trading or bond returns. This discovery extends the understanding of behavioral finance within the context of bond markets, diverging from established findings in equity and Treasury markets. Additionally, our analysis delineates the influence of macroeconomic announcements on trading activities, offering new insights into the market’s reaction to economic news. This study’s findings contribute to the broader literature on market microstructure and behavioral finance, providing empirical evidence on the interplay between psychological factors and macroeconomic information flow within corporate bond markets. By addressing these specific aspects with rigorous econometric techniques, our research enhances the comprehension of trading dynamics in less transparent markets, offering valuable perspectives for academics, investors, risk managers, and policymakers.

The role of green bonds in reducing CO2 emissions: a case of developing countries

PurposeThe global economy is growing very fast, and it is also facing environmental challenges. Due to increased economic activities, global warming is rising as a result of greenhouse gas emissions. Concepts like green finance and green investments are emerging to battle climate issues. The present study empirically examines the impact of green bonds on carbon dioxide (CO2) emissions in developing countries, as these countries are producing 63% of CO2 emissions around the globe.Design/methodology/approachTo check this impact, pooled ordinary least squares (OLS), fixed effect and generalized method of moments (GMM) techniques are applied using the annual data of 65 developing countries from 2008 through 2021.FindingsThe results indicate that the overall effect of green bonds on CO2 emissions is negative, as more issuance of green bonds reduces CO2 emissions, confirming results from the existing empirical literature. The study found that more foreign direct investment (FDI) and urbanization lead to more CO2 emissions, while increase in trade openness helps reduce CO2 emissions. It was found that promoting green bonds will help to promote environmentally friendly projects that will help to reduce CO2 emissions. Rapid urbanization has led to more energy demand for various industries like manufacturing, transportation and residential sectors, which leads to more CO2 emissions.Practical implicationsThe policymakers in these countries should make policies that help in reducing carbon emission by increasing green bonds and FDI in supporting projects that are environmentally friendly. Therefore, to mitigate such current and future issues, policymakers in developing countries need to give serious attention to this area to fulfill sustainable development goals.Originality/valueThis study presents a pioneering examination of green bonds and CO2 emissions in 65 lower- and middle-income countries (developing countries). We have tried to cover all developing countries that are causing more greenhouse gas emissions and need to shift to green finance strategies. It will be a contribution to the body of knowledge regarding the role of green bonds in reducing CO2 emissions. The present study will help in assessing the importance of green bonds in bringing low-carbon economies.

Cry wolf and it appears: Debt ceiling debates and new corporate bond issues

We provide evidence that attention to debt ceiling debates affects the pricing of new corporate bond issues. Measuring public attention by using data from the Google Search Volume Index with the keyword “debt ceiling,” we find an increase in bond yields for non-investment grade short maturity issues at times of high attention. Further analysis suggests that the results are likely not due to changes in uncertainty or risk aversion, rather, to attention spillover to lower quality firm's short-term financing needs.