Climate policy uncertainty and the cost of corporate bond
Identifying and addressing various financial risks on the way toward low-carbon transition is crucial for China to achieve its dual carbon goal.By performing textual analysis of newspaper articles,this paper constructs a novel index of climate policy uncertainty for China to examine the impact of the climate policy shock on the corporate bond cost as well as the mechanism behind the relationship.From a climate policy-cash flow sensitive perspective,this paper develops a theoretical model of financing decision-making under climate policy uncertainty and empirically verifies the hypothesis with a dataset of Chinese-listed companies from 2009-2020.The results show that bond spreads of climate policy-sensitive firms are significantly higher than that of climate policy-insensitive firms,which indicates that climate policy uncertainty significantly deteriorates corporate bond costs in China.Moreover,this effect increases with the maturity of the corporate bond and the level of climate policy uncertainty and is more profound in firms with a negative sensitivity to changes in climate policies.The results also prove that internal environmental governance and external regulatory enforcement intensity are two key channels by which the climate policy shock can impact the cost of corporate bonds in China.This paper contributes to the research of climate finance by providing a theoretical framework and empirical evidence on the relationship between climate policy shock and corporate bond cost and thus is crucial for policymakers to understand micro-level financing and investment risk in China under the dual carbon goal.
NETL
NSTL
万方数据
