IDEAS home Printed from https://ideas.repec.org/p/iuj/wpaper/ems_2026_09.html

Biodiversity, Governance, and Municipal Bonds

Author

Listed:
  • Yanghua Shi

    (International University of Japan)

Abstract

The paper shows that biodiversity-related regulatory changes significantly impact municipal bond yields. The paper also finds that certain local factors exacerbate this eect. The analysis exploits a series of statewide regulatory changes that alter the management of unowned cats, an invasive species widely associated with biodiversity loss. The study employs a state-border discontinuity approach, comparing municipal bond yields issued by counties aected by these statewide laws to those issued by nearby counties not subject to such laws. This paper provides one of the first empirical analyses of biodiversity-related regulatory shocks in financial markets. In doing so, it underscores the economic significance of biodiversity-related legislative measures and advances finance research that incorporates biodiversity.

Suggested Citation

  • Yanghua Shi, 2026. "Biodiversity, Governance, and Municipal Bonds," Working Papers EMS_2026_09, Research Institute, International University of Japan.
    • Handle: RePEc:iuj:wpaper:ems_2026_09
    as

    Download full text from publisher

    File URL: https://www2.iuj.ac.jp/workingpapers/index.cfm?File=EMS_2026_09.pdf
    File Function: First version, 2026
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Leippold, Markus & Sautner, Zacharias & Yu, Tingyu, 2024. "Corporate Climate Lobbying," CEPR Discussion Papers 19153, Centre for Economic Policy Research.
    2. Schultz, Paul, 2012. "The market for new issues of municipal bonds: The roles of transparency and limited access to retail investors," Journal of Financial Economics, Elsevier, vol. 106(3), pages 492-512.
    3. Gao, Pengjie & Lee, Chang & Murphy, Dermot, 2019. "Municipal borrowing costs and state policies for distressed municipalities," Journal of Financial Economics, Elsevier, vol. 132(2), pages 404-426.
    4. Christopher A. Lepczyk & Jean E. Fantle-Lepczyk & Kylee D. Dunham & Elsa Bonnaud & Jocelyn Lindner & Tim S. Doherty & John C. Z. Woinarski, 2023. "A global synthesis and assessment of free-ranging domestic cat diet," Nature Communications, Nature, vol. 14(1), pages 1-9, December.
    5. Heider, Florian & Ljungqvist, Alexander, 2015. "As certain as debt and taxes: Estimating the tax sensitivity of leverage from state tax changes," Journal of Financial Economics, Elsevier, vol. 118(3), pages 684-712.
    6. Paul Goldsmith-Pinkham & Matthew T Gustafson & Ryan C Lewis & Michael Schwert & Gregor Matvos, 2023. "Sea-Level Rise Exposure and Municipal Bond Yields," The Review of Financial Studies, Society for Financial Studies, vol. 36(11), pages 4588-4635.
    7. Richard C. Green & Dan Li & Norman Schürhoff, 2010. "Price Discovery in Illiquid Markets: Do Financial Asset Prices Rise Faster Than They Fall?," Journal of Finance, American Finance Association, vol. 65(5), pages 1669-1702, October.
    8. Christophe Diagne & Boris Leroy & Anne-Charlotte Vaissière & Rodolphe E. Gozlan & David Roiz & Ivan Jarić & Jean-Michel Salles & Corey J. A. Bradshaw & Franck Courchamp, 2021. "High and rising economic costs of biological invasions worldwide," Nature, Nature, vol. 592(7855), pages 571-576, April.
    9. Scott R. Loss & Tom Will & Peter P. Marra, 2013. "The impact of free-ranging domestic cats on wildlife of the United States," Nature Communications, Nature, vol. 4(1), pages 1-8, June.
    10. Michael Schwert, 2017. "Municipal Bond Liquidity and Default Risk," Journal of Finance, American Finance Association, vol. 72(4), pages 1683-1722, August.
    11. Green, Richard C. & Hollifield, Burton & Schurhoff, Norman, 2007. "Dealer intermediation and price behavior in the aftermarket for new bond issues," Journal of Financial Economics, Elsevier, vol. 86(3), pages 643-682, December.
    12. Pimentel, David & Zuniga, Rodolfo & Morrison, Doug, 2005. "Update on the environmental and economic costs associated with alien-invasive species in the United States," Ecological Economics, Elsevier, vol. 52(3), pages 273-288, February.
    13. Markus Leippold & Zacharias Sautner & Tingyu Yu, 2024. "Corporate Climate Lobbying," Swiss Finance Institute Research Paper Series 24-14, Swiss Finance Institute.
    14. Kevin R. Crooks & Michael E. Soulé, 1999. "Mesopredator release and avifaunal extinctions in a fragmented system," Nature, Nature, vol. 400(6744), pages 563-566, August.
    15. Jun Kyung Auh & Jaewon Choi & Tatyana Deryugina & Tim Park, 2022. "Natural Disasters and Municipal Bonds," NBER Working Papers 30280, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Baridhi Malakar, 2024. "Essays on Responsible and Sustainable Finance," Papers 2406.12995, arXiv.org.
    2. Jess N. Cornaggia & Kimberly J. Cornaggia & Ryan D. Israelsen, 2020. "Where the Heart Is: Information Production and the Home Bias," Management Science, INFORMS, vol. 66(12), pages 5532-5557, December.
    3. Andrew F. Haughwout & Benjamin Hyman & Or Shachar, 2021. "The Option Value of Municipal Liquidity: Evidence from Federal Lending Cutoffs during COVID-19," Staff Reports 988, Federal Reserve Bank of New York.
    4. Lu, Runjing & Ye, Zihan, 2023. "Roe v. Rates: Reproductive Healthcare and Public Financing Costs," SocArXiv 7t5jz, Center for Open Science.
    5. repec:osf:socarx:7t5jz_v1 is not listed on IDEAS
    6. Butler, Alexander W. & Yi, Hanyi, 2022. "Aging and public financing costs: Evidence from U.S. municipal bond markets," Journal of Public Economics, Elsevier, vol. 211(C).
    7. Larcker, David F. & Watts, Edward M., 2020. "Where's the greenium?," Journal of Accounting and Economics, Elsevier, vol. 69(2).
    8. Yi Li & Maureen O’Hara & Xing (Alex) Zhou, 2024. "Mutual Fund Fragility, Dealer Liquidity Provision, and the Pricing of Municipal Bonds," Management Science, INFORMS, vol. 70(7), pages 4802-4823, July.
    9. Ivan T. Ivanov & Tom Zimmermann & Nathan W. Heinrich, 2025. "Limits of Disclosure Regulation in the Municipal Bond Market," Management Science, INFORMS, vol. 71(10), pages 8452-8470, October.
    10. Choi, Hae Mi & Gupta-Mukherjee, Swasti, 2024. "Public sector unions and municipal debt," Global Finance Journal, Elsevier, vol. 60(C).
    11. Stephanie F. Cheng, 2021. "The Information Externality of Public Firms’ Financial Information in the State‐Bond Secondary Market," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 59(2), pages 529-574, May.
    12. John Bagley & Nicholas Fritsch & Shawn Nee, 2021. "Municipal Markets and the Municipal Liquidity Facility," Working Papers 21-07, Federal Reserve Bank of Cleveland.
    13. Cuny, Christine & Li, Ken & Nakhmurina, Anya & Watts, Edward M., 2025. "Muni Disclosure: All talk and no trade?," Journal of Accounting and Economics, Elsevier, vol. 80(1).
    14. Dario Cestau & Burton Hollifield & Dan Li & Norman Schürhoff, 2019. "Municipal Bond Markets," Annual Review of Financial Economics, Annual Reviews, vol. 11(1), pages 65-84, December.
    15. Li, Pei & Tang, Leo & Cloyd, C. Bryan, 2024. "Political polarization and state government bonds," Global Finance Journal, Elsevier, vol. 63(C).
    16. Yulianti Abbas, 2022. "Financial statement timeliness and bond‐price dispersion in the municipal market," Public Budgeting & Finance, Wiley Blackwell, vol. 42(1), pages 66-97, March.
    17. John M. Griffin & Nicholas Hirschey & Samuel Kruger, 2023. "Do Municipal Bond Dealers Give Their Customers “Fair and Reasonable” Pricing?," Journal of Finance, American Finance Association, vol. 78(2), pages 887-934, April.
    18. Brent W. Ambrose & Matthew Gustafson & Maxence Valentin & Zihan Ye, 2026. "Voter-Induced Municipal Credit Risk," Management Science, INFORMS, vol. 72(2), pages 1214-1235, February.
    19. Cuny, Christine, 2018. "When knowledge is power: Evidence from the municipal bond market," Journal of Accounting and Economics, Elsevier, vol. 65(1), pages 109-128.
    20. Gao, Pengjie & Lee, Chang & Murphy, Dermot, 2022. "Good for your fiscal health? The effect of the affordable care act on healthcare borrowing costs," Journal of Financial Economics, Elsevier, vol. 145(2), pages 464-488.
    21. Liu, Chunbo & Xu, Liang & Yang, Liuming & Zhou, Yang, 2025. "Trade liberalization and municipal financing costs," Journal of Banking & Finance, Elsevier, vol. 178(C).

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    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
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iuj:wpaper:ems_2026_09. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Toshiyuki Moriyama, Office of Academic Affairs (email available below). General contact details of provider: https://edirc.repec.org/data/gsiujjp.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.