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ESG performance and bond return volatility

Author

Listed:
  • Zhang, Zehua
  • Zhao, Ran
  • Zhu, Lu
  • Chamberlain, Trevor

Abstract

This study examines the effects of environmental, social, and governance (ESG) performance on bond return volatility. After controlling for bond characteristics and firm fundamentals, we find a robust positive relationship between ESG performance and bond return volatility. The empirical results demonstrate that the impact on bond return volatility is primarily driven by ESG strengths rather than concerns. The results are robust to alternative measures, sample periods, and endogeneity controls. Furthermore, the effect of ESG performance is more pronounced for firms with opportunistic managers and poor information environments.

Suggested Citation

  • Zhang, Zehua & Zhao, Ran & Zhu, Lu & Chamberlain, Trevor, 2025. "ESG performance and bond return volatility," Journal of Financial Stability, Elsevier, vol. 79(C).
    • Handle: RePEc:eee:finsta:v:79:y:2025:i:c:s1572308925000634
    DOI: 10.1016/j.jfs.2025.101434
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    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility

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