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The impact of ESG news sentiment on green bond credit spreads: Signal transmission and market response

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  • Li, Yilong
  • Chen, Xiaoqiu
  • Liu, Shucheng

Abstract

Based on signaling theory, this study investigates the impact of ESG news sentiment on green bond credit spreads using data from Chinese A-share listed companies (2016–2022). The results show that positive ESG news, as a favorable market signal, significantly reduces credit spreads, while negative news increases them. Further analysis reveals that investor sentiment mediates this relationship, as ESG news indirectly affects bond pricing by shaping market expectations. Additionally, ESG ratings and green innovation play significant moderating roles. Firms with higher ESG ratings can more effectively leverage positive news to reduce financing costs, while those with strong green innovation capabilities experience smaller increases in credit spreads when faced with negative news. The findings highlight the critical role of ESG transparency and green innovation in green bond pricing, providing theoretical and practical insights for policymakers to enhance ESG rating systems and for firms to optimize ESG disclosure strategies, promoting the sustainable development of green finance markets.

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  • Li, Yilong & Chen, Xiaoqiu & Liu, Shucheng, 2026. "The impact of ESG news sentiment on green bond credit spreads: Signal transmission and market response," Research in International Business and Finance, Elsevier, vol. 84(C).
    • Handle: RePEc:eee:riibaf:v:84:y:2026:i:c:s0275531926000590
    DOI: 10.1016/j.ribaf.2026.103332
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    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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