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The liquidity impact of Chinese green bonds spreads

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  • Su, Tong
  • Lin, Boqiang

Abstract

Green bond is widely treated as one of the most crucial financial instruments for achieving carbon neutrality. While existing research is insufficient to provide an in-depth understanding of the liquidity impact of green bonds, it obstructs this emerging asset's promotion and investment. This paper expands the current periphery of research by centering on Chinese green bonds. After employing the portfolio-based and the entire sample regression approach, we evaluate nine potential proxies' performance to clarify liquidity measurement metrics. We document that issued amount, time to maturity, yield dispersion, the specific target of proceeds or not, and reputation of the underwriter are the five effective indicators. Consequently, the average Chinese green bond liquidity premium is estimated based on these proxies, 28.14 bps, occupying 16.92% of the whole green bond yield spreads. The results of time-varying liquidity premiums furtherly point out some significant findings of the current circumstance for developing the Chinese green bonds. By combining a matching process, we display the corresponding conventional bonds' liquidity impact with an average premium of 19.4 bps. Based on such differences between the two, we imply some unique features of green bonds.

Suggested Citation

  • Su, Tong & Lin, Boqiang, 2022. "The liquidity impact of Chinese green bonds spreads," International Review of Economics & Finance, Elsevier, vol. 82(C), pages 318-334.
    • Handle: RePEc:eee:reveco:v:82:y:2022:i:c:p:318-334
    DOI: 10.1016/j.iref.2022.06.019
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    Cited by:

    1. Pham, Son D. & Nguyen, Thao T.T. & Do, Hung X., 2024. "Impact of climate policy uncertainty on return spillover among green assets and portfolio implications," Energy Economics, Elsevier, vol. 134(C).
    2. Tingguo Zheng & Hongyin Zhang & Shiqi Ye, 2024. "Monetary Policies on Green Financial Markets: Evidence from a Multi-Moment Connectedness Network," Papers 2405.02575, arXiv.org, revised Oct 2024.
    3. Qi, Xiaohong & Zhang, Guofu, 2022. "Dynamic connectedness of China’s green bonds and asset classes," The North American Journal of Economics and Finance, Elsevier, vol. 63(C).
    4. Zheng, Tingguo & Zhang, Hongyin & Ye, Shiqi, 2024. "Monetary policies on green financial markets: Evidence from a multi-moment connectedness network," Energy Economics, Elsevier, vol. 136(C).
    5. Su, Tong & Zhang, Zuopeng (Justin) & Lin, Boqiang, 2022. "Green bonds and conventional financial markets in China: A tale of three transmission modes," Energy Economics, Elsevier, vol. 113(C).
    6. Wang, Congcong & Wang, Chong & Long, Huaigang & Zaremba, Adam & Zhou, Wenyu, 2024. "Green bond credit spreads and bank loans in China," International Review of Financial Analysis, Elsevier, vol. 94(C).
    7. Su, Tong & Shi, Yuning & Lin, Boqiang, 2023. "Label or lever? The role of reputable underwriters in Chinese green bond financing," Finance Research Letters, Elsevier, vol. 53(C).
    8. Xia, Yufei & Shi, Zhengxu & Du, Xiaoying & Niu, Mengyi & Cai, Rongjiang, 2023. "Can green assets hedge against economic policy uncertainty? Evidence from China with portfolio implications," Finance Research Letters, Elsevier, vol. 55(PA).
    9. Zhongfei Chen & Yu Xiao & Kangqi Jiang, 2023. "Corporate green innovation and stock liquidity in China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(S1), pages 1381-1415, April.

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    More about this item

    Keywords

    Green bond; Liquidity proxies; Liquidity premium; China; Yield spreads;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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