Do carbon emissions affect the cost of capital? Primary versus secondary corporate bond markets

This scientific article analyzes the theoretical foundations, economic mechanisms, and institutional aspects of supporting the participation of state-owned enterprises in financial markets. Based on empirical and statistical data, the study demonstrates that the participation of state-owned enterprises in capital markets contributes to increasing market liquidity, attracting long-term investment resources, and reducing the burden on the state budget. In particular, the role of the public sector in capital markets is revealed through the analysis of IPO and SPO activities as well as corporate bond issuance dynamics. The research findings indicate that supporting the participation of state-owned enterprises in financial markets is a key factor in strengthening financial stability, developing market infrastructure, and ensuring the long-term growth of the national economy.

Abstract This paper investigates the impact of volatility on expected corporate bond returns in China by using transactional data from 2010 to 2022. Portfolio analysis and Fama‐MacBeth regression show that volatility has a negative impact on expected corporate bond returns. After controlling for credit rating, maturity, liquidity, stock volatility and risk exposures, the volatility effect remains significant. By incorporating a new volatility factor and the bond market factor into the term‐default two‐factor bond pricing model of Fama and French ( Journal of Financial Economics , 1993, 33, 3), we construct a new four‐factor pricing model of corporate bonds. The proposed model captures the premium of volatility risk well and makes a significant marginal contribution to explaining the excess returns of corporate bonds. In addition, we find that volatility has a predictive effect on the default of corporate bonds.

Trading activity and fund performance - Evidence from corporate bond mutual funds

Intertemporal hedging and the carbon beta premium: Insights from Chinese corporate bonds

This study evaluates the Duration Times Spread (DTS) framework in the Korean corporate bond market. Using a comprehensive dataset covering more than 3.8 million bond–month observations from 2010 to 2020, we examine whether the key empirical properties underlying DTS—the proportional relationship between spread levels and spread volatility—hold in this market. Our results show that both systematic and idiosyncratic spread volatilities are proportional to the level of spreads, and that excess return volatility increases proportionally with DTS. These findings confirm the central assumptions of the DTS framework and demonstrate that relative spread changes provide a more stable basis for forecasting excess return volatility than absolute spread changes. When compared against the traditional spread-duration approach, DTS yields residuals that are closer to zero on average and more tightly distributed, indicating superior forecasting accuracy. Overall, the evidence extends the applicability of DTS to an understudied fixed-income market and highlights its usefulness for credit risk measurement, portfolio construction, and volatility forecasting in the Korean corporate bond market.

This study identifies the exogenous shock of the 2025 US reciprocal tariff imposition on the Korean economy and analyzes its dynamic impact on housing prices in the Seoul Metropolitan Area through inflation, exchange rate, and interest rate channels. To this end, monthly panel data from January 2020 to September 2025 were constructed for 59 districts in the Seoul Metropolitan Area, and a Panel VARX model was employed with the tariff shock set as an exogenous variable. The empirical results indicate that the US reciprocal tariff shock significantly induced increases in consumer prices, the KRW/USD exchange rate, and corporate bond yields. Specifically, both the rise in these macroeconomic variables and the tariff shock itself exerted a statistically significant negative impact on apartment sales prices, confirming that external trade risks act as a downward pressure on the housing market. This study demonstrates that tariff shocks negatively affect the housing market via financial channels. The findings suggest that changes in the global trade environment must be considered a critical factor in managing housing market volatility.

As climate change continues to reshape global economic and regulatory landscapes, the limitations of traditional credit risk models in accounting for environmental exposure have become increasingly apparent. This paper explores a structured methodology for integrating climate-related transition risks into credit risk assessment frameworks, using Pierre Monnin’s sector-based model as a foundational reference. The proposed approach involves three key stages: classification of corporate bond portfolios by sector, assignment of transition risk scores based on carbon intensity and policy exposure, and credit rating adjustments reflecting sectoral vulnerability. The analysis is supported by contemporary research from authors such as Ackerer and Filipović, Karydas and Xepapadeas, and Jung and Engle, who collectively emphasize the importance of incorporating forward-looking and environmental variables into financial modeling. Through simulated data, the study illustrates how integrating transition risk significantly alters credit profiles, particularly in high-emission sectors like energy and utilities. For example, credit loss projections increased by over 60 percent for the energy sector once climate risk was factored in. These results highlight the urgent need for financial institutions and regulators to move beyond conceptual awareness and toward implementation of climate-adjusted credit evaluation tools. This paper contributes to existing literature by operationalizing climate risk integration in a practical, replicable format, offering both analytical clarity and a path forward for climate-resilient credit systems.

ABSTRACT We examine the impact of risk aversion, ambiguity, and uncertainty (geopolitical and economic) on the ESG thematic bond markets in emerging countries. We analyze ESG sovereign (both USD and local currency denominated) and corporate bond markets on the aggregate and regional levels. Increasing levels of risk aversion and economic uncertainty are associated with significant declines in both ESG thematic sovereign and corporate emerging bond returns. On the contrary, ambiguity exhibits a positive impact on bond market returns. Finally, geopolitical risk shows a significant negative relationship only in certain regions. The comparison between ESG and non‐ESG emerging market bonds reveals that uncertainty sources are generally reflected in bond returns in the same way, regardless of the ESG nature of the bonds.

For businesses, financial institutions, and other organizations, funds can be raised through several methods, including issuing stocks or bonds or obtaining bank loans. Bond issuance is a crucial financing tool. When a business or institution decides to issue bonds, the yield is a key consideration because it determines both the financing cost and the cash flow required for repayment. This study used bond pricing theory and mathematical derivations to analyze the relationship between corporate bond prices and yields. The analysis showed that bond prices and yields are inversely proportional. This finding indicates that businesses can determine bond pricing and interest payments, as well as the repayment amount and term of bank loans, based on their expected cash flows and acceptable financing costs, thereby ensuring cash-flow stability and reducing financing risk.

Convertible bond financing has gained significant traction in China’s capital market, yet it poses financial risks, particularly for highly leveraged firms. This study investigates how corporate financial traits influence the decision to issue convertible bonds, challenging the direct applicability of Western theoretical frameworks in China’s unique institutional context. We employ a natural experiment design, constructing a binary logistic regression model to analyze data from Chinese A-share listed companies that issued convertible bonds, corporate bonds, seasoned equity offerings, or rights offerings between 2022 and 2023. Our results reveal a paradox: contrary to risk-transfer theory, firms with lower leverage exhibit a stronger propensity to issue convertible bonds. Instead, motives are driven by high profitability, operational inefficiencies, and robust operating cash flow generation—traits that align with signaling and backdoor equity theories. The study identifies China’s convertible bond market as a dual-track system where regulatory screening distorts classical motives while market frictions amplify the role of convertible bonds in resolving information asymmetry. We conclude with targeted policy implications for regulators and corporate treasurers to enhance market efficiency and governance.

Bonds are an important form of funding for companies to improve their operations, therefore the issuance of corporate bond securities has increased year after year. This study aims to examine the influence of financial and non-financial factors on debt ratings. Financial factors are measured by financial risk and profitability, while non-financial factors are measured by ESGRisk. The sample used in this study were companies that issued bonds and received bond ratings and had ESGRisk scores. From the sample selection, 62 companies were selected. Data analysis used ordinal regression analysis techniques with the help of SPSS version 26. The results showed that financial risk had no effect on debt ratings, while profitability and ESGRisk had a positive effect on debt ratings.

Purpose The United States Patent and Trademark Office (USPTO) issues a notice of allowance (NOA) prior to a patent being granted, which serves to notify firms of forthcoming patents. An NOA could also serve as a positive signal. Credit rating agencies (CRAs) are exempt from regulation fair disclosure. Firms can disclose credible patent information to CRAs with minimal proprietary costs. When firms seek to fund their innovative activities through corporate bonds, they may benefit from disclosing their forthcoming patents to CRAs. This study focuses on CRAs' ex ante information advantage and examines the impact of private information on borrowers' initial credit rating and the cost of debt. Design/methodology/approach This paper studies how NOAs affect credit ratings and borrowing costs in the corporate bond market. We find that firms with forthcoming patents tend to receive better credit ratings and exhibit a lower cost of debt. Moreover, this informational advantage persists when considering the subsequent economic impact of the patents. Further subsample analyses show that the information advantage of forthcoming patents is more pronounced during non-crisis periods and for investment-grade bonds and bonds issued by large firms, as they are more likely to have a lower cost of debt even after controlling for the credit ratings. Our findings are robust for both the propensity score matching approach and the entropy balancing method. Findings We find that issuing firms with forthcoming patents tend to receive better credit ratings and exhibit a lower cost of debt. This informational advantage is retained even after accounting for the subsequent economic impact of the patents. Further subsample analyses show that the information advantage of forthcoming patents is more pronounced during non-crisis periods and for investment grade bonds and bonds issued by large firms as they are more likely to have a lower cost of debt even after controlling for the credit ratings. Our findings are robust for a propensity score matched approach and the entropy balancing method. Research limitations/implications Our study has some limitations. Our results depend on the data we have for NOA disclosures. There may be hidden factors that affect both patenting and bond issuance that we cannot observe. Our analysis is limited to U.S. firms, so the results may not be applicable in other countries with different regulations or market conditions. We also focus only on NOAs; however, other kinds of private information could matter. Future studies could examine international settings, consider other types of intangible assets or investigate how changes in regulation or CRA practices impact the use of private information in debt markets. Practical implications Our research identifies a gap in the literature concerning the role of NOAs in public debt issuance, providing a comprehensive analysis of how these patents affect credit ratings and borrowing costs – a dimension previously lacking in the existing literature. For managers, this implies a practical pathway to reducing capital costs by sharing innovation milestones with rating agencies. Investors can better interpret bond market signals by understanding when and how private information reaches CRAs. For policymakers, our work highlights the importance of transparency and the potential consequences of regulatory exemptions for CRAs with regard to selective information access. Social implications Our findings add to existing theories on information asymmetry and signaling by demonstrating that CRAs play a central role in bringing private information about innovation into the public bond market. By highlighting this process, our study connects research on rating agencies, innovation and bond pricing and shows how sharing selective information with rating agencies can have a direct impact on a firm's ability to raise capital and the terms it receives. Originality/value We provide new empirical evidence that in the corporate bond market, forthcoming patents can improve credit ratings, which in turn reduces the cost of debt financing at the time of bond issuance. Our study identifies a gap in the literature concerning the role of NOA in public debt issuance, providing a comprehensive analysis of how these patents affect credit ratings and borrowing costs – a dimension previously lacking in the existing literature. For practitioners, our findings suggest that strategically disclosing forthcoming patents to CRAs can be a valuable tool for firms seeking to optimize bond issuance conditions.

Spillover of the carbon risk along the supply chain: Evidence from the U.S. corporate bond market

Over the past decade, local administration financing vehicles (LGFVs) in China have issued a large volume of municipal investment bonds to support infrastructure development and urban expansion. Despite their economic relevance, the credit risk of these bonds is largely shaped by implicit government guarantees, which substantially complicates risk assessment and valuation. Motivated by the presence of strategy persistence in administration asset management and the non-market-driven shocks affecting state-owned enterprise asset values, this paper models state-owned enterprise asset values dynamics using a fractional Brownian motion to capture long-range dependence and a jump–diffusion process to account for abrupt structural interventions. Within a structural credit risk framework, we develop a valuation model for municipal investment bonds that explicitly incorporates an implicit guarantee intensity parameter, and employ the fast Fourier transform (FFT) to obtain efficient numerical solutions. The results indicate that bond prices are positively related to the strength of implicit administration guarantees, yet the relationship is highly nonlinear. When the implicit guarantee intensity is relatively low, bond prices exhibit limited sensitivity to changes in guarantees; however, once the implicit guarantee intensity exceeds a critical threshold, price sensitivity increases markedly. These findings provide a new modeling perspective for pricing corporate bonds with implicit administration backing and contribute to the broader literature on credit risk under state intervention.

AI availability and U.S. corporate bond markets

Environmental Information Disclosure and Corporate Bond Spread

Green Bonds (GBs) have emerged as one of the most prominent innovations in sustainable finance instruments in recent times, necessitating an understanding of the factors determining their issuance. However, empirical literature on the factors driving GB issuance in Indonesia is limited. This study aims to investigate the impact of bond characteristics and macroeconomic factors on Government and Corporate Bond issuance from 2018 to 2023 using a random-effects panel regression model. The results confirm that all factors, except economic growth, have a significant effect on GB issuance; however, the impact of some factors differs between government-issued GBs and corporate-issued GBs. Among them, the green stock market and exchange rate have a positive effect on Corporate GB issuance, but the opposite is true for Government GB issuance. Furthermore, increases in interest rates and coupon rates encourage more government GB issuance but have the opposite effect on Corporate GB issuance. Our results contribute to the literature on sustainable finance, providing policymakers, issuers, and investors with valuable practical insights to encourage the development of the green bond market.

ABSTRACT We investigate the sources of the dealer centrality premium in the over‐the‐counter market for corporate bonds. We model dealer heterogeneity by allowing the dealer's status in the network to determine search effort and inventory costs when choosing to conduct riskless principal or principal trades. Structural estimates match the observed centrality premium across transaction types and trade count deciles. Counterfactual analyses reveal that measures that limit core dealer bargaining power vis‐a‐vis clients reduce roundtrip spreads. Removing core dealers' advantage in search relative to peripheral dealers has little effect on transaction costs.

ABSTRACT We investigate whether and how CEO narcissism affects corporate credit risk, measured by bond yield spreads. Using 12,826 US corporate bond observations from 2008 to 2023 for this investigation, we find that CEO narcissism is significantly and positively associated with corporate credit risk through heightened asset value volatility and greater financial leverage. In addition, we explore new mechanisms related to management team characteristics, focusing on both CEO‐ and team‐level traits. Specifically, the positive association between CEO narcissism and corporate credit risk is more pronounced when the top management team has more shared working experience and when the CEO has a broader social network. These executive traits strengthen the CEO's risk‐taking incentives, thereby amplifying the effect of CEO narcissism on bondholders. Moreover, subordinate executives’ relative power weakens the CEO narcissism effect because of the internal monitoring function, whereas CEO ownership intensifies the effect due to the debt–equity conflict mechanism. Our results are robust after addressing endogeneity, controlling for CEO overconfidence, and employing alternative measures of CEO narcissism and firm credit risk.