Bond Returns Research Articles

Foreign asset expropriation and sovereign bond ratings in the developing world

Abstract Research shows that foreign asset expropriation narrows long-term bond spreads, resulting in lower borrowing costs. However, no empirical studies have investigated the effects of expropriation on sovereign bond ratings. Bondholders and sovereign bond issuers track ratings by credit rating agencies because they impact interest rates and capital costs. Using up to 59 developing countries from 1996 to 2016, we find that expropriation signals lower bond repayment, as asset confiscation blatantly violates international rule of law and discourages foreign direct investment (FDI) inflows, reducing bond ratings. Mediation analysis also indicates that FDI and the rule of law mediate the relationship between expropriation and bond ratings. Further, we distinguish between direct and indirect expropriation and observe that direct expropriation has a greater probability of decreasing ratings. Our research suggests that expropriation holds economic consequences for developing countries, indicating how expropriation negatively affects sovereign bond issuers in the financial and investment community.

How do green municipal bonds affect carbon emissions in China? Evidence from the staggered difference-in-differences approach.

Under the "Dual Carbon Goals", China's municipal government bonds play a vital role in advancing local environmental governance. This paper constructs a quasi-natural experiment based on the issuance of green municipal bonds, and empirically examines its carbon emission reduction effects by using the staggered difference in differences approach. The issuance of green municipal bonds can substantially diminish the level of carbon intensity and pass a series of robustness tests. Green municipal bonds can generate green project financing effect, greening effect and industrial structure allocation effect to promote the reduction of carbon emission level in a region. At the same time, there exists heterogeneity in local governments' emphases on environmental protection, economic development, carbon peaking progress and urban resource endowment. Further research found that green municipal bonds have significant spatial spillover effect, which not only promotes the reduction of local carbon intensity, but also leads to the reduction of carbon intensity in the surrounding cities. The proposed policy implications include: increase the proportion of green municipal bonds in local government bonds; establish standardized issuing criteria of green municipal bonds, accelerate credit rating and improve performance management of green municipal bonds; design green municipal bonds according to local conditions; and strengthen green finance and its supporting services.

Transmission Mechanism of Green Monetary Policy: Practices in some countries and recommendations for Vietnam

Central banks' green monetary policies are crucial for promoting sustainable development and mitigating climate change. Establishing a stable green monetary policy transmission mechanism will create incentives for financial institutions to engage in green activities, ensuring transparency in reporting and monitoring green investment. This article focuses on analyzing the transmission mechanisms of green monetary policy through instruments such as preferential interest rates and the issuance of green bonds, thereby creating favorable conditions for the development of renewable energy projects and clean technologies. The research is based on data from 2020 to 2023 and the experiences of the United Kingdom and Germany, two pioneering countries in the field of green finance. The findings provide assessments of the successes, limitations, and underlying reasons for the implementation of green monetary policy in these two nations. Based on the research results, the article presents recommendations for Vietnam on the application of green monetary policy within its financial system, contributing to environmental protection, minimizing the impact of climate change, and fostering sustainable development in Vietnam.

Green bond issuance and value creation for stockholders: evidence from Italy

Green bond issuance and value creation for stockholders: evidence from Italy

The Main Determinants of Green Bond Issuance: A Systematic Review

The Main Determinants of Green Bond Issuance: A Systematic Review

Green bond issuance and value creation for stockholders. Evidence from Italy

Green bond issuance and value creation for stockholders. Evidence from Italy

The effect of collateral-based monetary policy on green finance: Evidence from China

Research background: Green finance is crucial to accelerating China’s green transition, and its growth depends largely on the corresponding monetary policy. To increase financial institutions’ support for the green economy, China’s central bank has recognized green bonds as eligible collateral for monetary policy tools since June 1, 2018. Purpose of the article: In this context, we investigate the effect of collateral-based monetary policy (CBMP) on green finance (GF) in China by utilizing a quasi-natural experiment approach. Methods: Using the Propensity Score Matching-Difference in Difference (PSM-DID) method and daily bond trading data, we investigated the impact of CBMP on the cost and availability of green finance. In further analysis, we employed bond issuance data and listed company data to examine the spillover effects of CBMP and its influence on the real economy. Findings & value added: Our results suggest that CBMP, in the secondary market, actively stimulated the growth of GF by reducing green bond spreads and expanding their financing scale. Furthermore, this beneficial outcome is particularly obvious for low-grade green bonds, bonds issued by state-owned enterprises (SOEs), and in regions with stringent environmental regulations and high government green attention. Particularly, we have also found that there exists a spillover effect across markets, i.e., endowing collateral eligibility to green bonds in the secondary market, can reduce bonds’ spreads and increase bonds’ financing scale in the primary market. Finally, we have found that CBMP effectively incentivizes corporate green behavior rather than “greenwashing”. Our findings suggest that China should further optimize CBMP, focus more on non-SOEs green finance difficulties, and strengthen local governments’ green attention and implementation capacity.

China's green bonds – A tool for sustainable development: Domestic drivers and challenges

Subject. This article discusses the role of green bonds in achieving the Sustainable Development Goals in China, as well as overseas green bond markets. Objectives. The article aims to develop proposals for the further development of the green bond market in China. Methods. For the study, I used the general scientific research methods. Results. The article finds that the unification of Chinese and international standards for the issuance of green bonds will heighten the interest of foreign investors in the development of projects related to environmental protection. Conclusions. Priority should be given to promoting green bonds within the framework of the Belt and Road Initiative.

Understanding the cross‐section of CDS returns using equity options

AbstractWe examine the cross‐section of credit default swap (CDS) returns by forming CDS portfolios based on the implied volatility curves of equity options. We document that CDS protection sellers earn higher average returns for: (1) firms with higher at‐the‐money implied volatility and (2) firms with steeper volatility skew when conditioning on high implied volatility. We find that, relative to bond returns, CDS returns are better explained by our proposed measures interacted with standard credit determinants. Our reasoning is that the large degree of informed trading in the CDS market makes it more in sync with the equity options market, which is also known to attract informed traders.

Exploring the multifaceted impacts of convertible bond issuance on stock market quality: Evidence from China

Exploring the multifaceted impacts of convertible bond issuance on stock market quality: Evidence from China

Tax Reform Regarding Tokenized Corporate Bonds in Japan

The 2024 tax reform in Japan took a significant step forward toward establishing a tax system designed to promote the issuance of corporate bonds as security tokens for wholesales. Prior to the amendment, certain entities, including banks, insurance companies, and certain financial instruments business operators, were subject to withholding tax on interest income from tokenized bonds. However, these entities are now exempt from the withholding tax, provided the tokenized bonds are managed in accordance with the relevant public notice of the Financial Services Agency in Japan. Owing to this recent tax reform, the barrier that previously prevented many companies from issuing security token bonds for wholesale purposes has been removed, and as a result, the issuance of such bonds is expected to increase substantially going forward.

The Impact of Government Bond Issuance on Banking Activities and Economic Growth in Indonesia

This paper aims to test the effect of crowding out on one of the developing countries, namely Indonesia. Using monthly data from January 2008 to June 2023, VECM's estimates show that the growth of government debt through its securities is negatively and significantly related to the growth of banking loans, both in the short and long term. This shows that there has been a crowding out effect in the process of withdrawing government debt. Meanwhile, the results of the Markov-switching estimate show that credit growth has a positive and significant impact on economic growth, both in normal and turbulent conditions. The growth of government debt is only positive and significant in turbulence periods, but not significant in normal times. These findings show that the government's debt policy has been at risk to the banking system and the economy.

An Overview of Factors Influencing Corporate ESG Performance

With the advancement of the global sustainability agenda, the environmental, social and governance (ESG) performance of corporations has become a focus of attention for both academics and businesses. However, existing studies have focused on the exploration of single factors affecting ESG performance, with relatively few comprehensive analyses. The purpose of this paper is to complement and expand existing research by systematically sorting out and analysing multiple factors affecting corporate ESG performance. This paper systematically collates the external and internal factors of corporate ESG performance. By comprehensively analysing the existing studies, it reveals the specific role mechanisms and influence paths of these factors on corporate ESG performance. The findings show that external factors such as policy and regulation, the digital economy, and investor attention, as well as internal factors such as heterogeneous majority shareholder governance, executive characteristics, and green bond issuance, significantly affect corporate ESG performance. These factors work together to drive better corporate ESG performance.

Government Restriction, Trading Network, and Bond Yield: A Quasi-Natural Experiment Based on the Chinese Inter-Bank Bond Market

ABSTRACT Whether government regulation can improve market efficiency is a contentious and significant issue. This study examines spot transaction data from China’s bond market in 2018 and concludes that government regulation directly corrects market pricing. Additionally, it empowers the secondary market to improve its price discovery and risk identification functions, thereby enhancing market efficiency. The study does this by using the introduction of pricing restrictions on local government bond issuance in August 2018 as a quasi-natural experiment. Unlike existing studies that focus more on ordinary markets, this study provides a representative example of financial markets for the public interest theory of regulation.

Unveiling Investor Motivation and Trust in Impact Investing: Evidence from Global Green Bond Issuances

Unveiling Investor Motivation and Trust in Impact Investing: Evidence from Global Green Bond Issuances

A Study on The Impact of Convertible Bond Issuance on The Performance of Listed Companies: A Case Study of Chengdu Bank

This study investigates the impact of convertible bond issuance on the performance of listed companies, focusing on Chengdu Bank as a case study. Convertible bonds are a significant refinancing tool for listed companies in China. Since the China Securities Regulatory Commission introduced convertible bonds in 2008, their application has become widespread. This paper explores the motivations behind Chengdu Bank's issuance of convertible bonds, such as enhancing financial strength, meeting regulatory requirements, supporting the real economy, and mitigating risks. Utilizing financial data from 2017 to 2024, including ROE, OPGR, and CBI, alongside macroeconomic indicators like GDP growth rate and CPI, this study employs a multiple linear regression model to quantify the effects of convertible bond issuance on the bank's performance. Preliminary findings indicate that Chengdu Bank's performance improved significantly during and after the issuance years, suggesting that convertible bonds effectively bolster financial resilience and operational efficiency. This research provides valuable insights for banks considering similar refinancing strategies to optimize capital structure and enhance risk management.

Convertible Bonds: A Supplementary Exit Path for Private Equity Funds

With the rapid development of China's economy, private equity funds have become an important force to help unlisted small and medium-sized startups quickly become bigger and stronger. As an important financing channel for enterprises, private equity funds can provide a large amount of financial support for target enterprises, and in all aspects of their investment operations, the choice of exit method is particularly important as the core link that directly affects returns. Therefore, this paper takes the case study as the research method, and selects SoftBank Group's gradual reduction of Alibaba shares through the issuance of convertible trust bonds as a case study, and studies the use of convertible bonds as a supplement to the IPO exit method of private equity funds. The study finds that convertible bonds, as a supplement to the IPO exit method, have more efficient, lower risk and low cost financing capabilities, effectively solve the problem of single exit path, improve the speed of private equity fund exit liquidation, and reduce the loss range while retaining the profit growth space.

Research on the Impact of Green Bond Issuance in New Energy Automobile Industry-- Taking BYD Company as an Example

Green bonds are a cutting-edge financial tool that is becoming more and more significant in encouraging green development and investment in the environment. This paper will analyze the operational and financial impact on the company based on the BYD green bond case. From the view of weighted average return on net assets, long-term debt ratio and other indicators, it is found that green bonds can help the company to improve profits, but also bring more debt pressure. Overall green bonds are a good financing route for BYD, creating a diversified development path, broadening the investor base, and improving the green reputation and the company's financial stability. This paper further suggests optimizing the structure of the new energy green bond market, improving the regulatory system and enhancing investor education in order to promote the healthy development of this market.

Managing environmental finance in the digital era: Evidence from green bonds

Using recently available data on green finance from the International Monetary Fund, we analyze the impact of digital transformation on green bond issuance in forty-six countries during 1991–2021 within the context of environmental finance management. To measure digital transformation, we utilize the Digital Adoption Index provided by the World Bank and its subcomponents, aligning this analysis with broader environmental finance management strategies. Additionally, we control for the effect of various environmental, economic, and technological factors. Our results reveal a positive association between digital transformation and green bond issuance across these countries. Furthermore, our findings suggest that the effect of digital transformation on green bond issuance may not occur immediately and is characterized by a linear relationship. Our sensitivity testing and endogeneity analysis confirmed the reliability of our findings under different assumptions and model specifications. After decomposing the digital adoption index, our dominance analysis highlighted the key role of advancements in digital adoption by businesses, particularly, and the quality of capital services in the economy in driving the development of the green bond market. Further, stable political conditions, low enforcement costs, and fintech market growth mitigate enhance the digital transformation impact on green bonds. These results indicate potential directions for effective policy interventions.

Assessing the Role of Climate Transition Bonds in Advancing Green Transformations in Japan

This study investigates the potential of Climate Transition Bonds as strategic financial instruments in promoting green transformations within Japan’s carbon-intensive sectors. Through a qualitative case study approach, we assess four prominent bond issuances—Japan Government Bonds, MUFG Bonds, TEPCO Bonds, and SMBC Bonds—focusing on their contributions to emissions reduction, renewable energy expansion, and technological innovation. The analysis reveals that these bonds play a pivotal role in enabling Japan to advance its carbon neutrality goals by financing key decarbonization projects. However, significant challenges persist, including the limited scalability of emerging technologies, disparities in economic benefits across sectors, and governance inefficiencies that may hinder optimal outcomes. The findings underscore the necessity of refining collaborative governance frameworks to enhance transparency, stakeholder inclusivity and regulatory oversight in the deployment of these bonds. This paper contributes to the discourse on sustainable finance by elucidating the policy implications of climate transition bonds, proposing avenues for improved governance, and highlighting the structural adjustments required to align these financial mechanisms with Japan’s long-term sustainability objectives.