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Impact of credit quality on credit spread of Green Bonds: A global evidence

Author

Listed:
  • Sisira Colombage
  • K.G.M. Nanayakkara

    (University of Kelaniya)

Abstract

This study investigates the effect of credit quality on the credit spread of green bonds (GB). GB issues in 2016 and 2017 are considered for the study along with comparable conventional bonds (CB). The sample is categorised into two panels, investment-grade and non-investment-grade, to examine the effect of credit quality on the credit spread of GBs. Analysing a large sample of daily data, the study concludes that GBs are issued at a premium in the market only if the particular bond issue is an investment-grade one. This study uses hybrid method in panel regression analysis to reach the aforesaid conclusion.

Suggested Citation

  • Sisira Colombage & K.G.M. Nanayakkara, 2020. "Impact of credit quality on credit spread of Green Bonds: A global evidence," Review of Development Finance Journal, Chartered Institute of Development Finance, vol. 10(1), pages 31-42.
    • Handle: RePEc:afj:journ3:v:10:y:2020:i:1:p:31-42
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    More about this item

    Keywords

    Credit rating; credit spread; green bonds; investment-grade bonds; non-investment-grade bonds; hybrid method in panel regression;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development

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