Primary Corporate Bond Markets and Social Responsibility

55 Pages Posted: 10 Sep 2020 Last revised: 20 Dec 2021

See all articles by Michael Halling

Michael Halling

University of Luxembourg

Jin Yu

Monash University -Department of Banking and Finance

Josef Zechner

Vienna University of Economics and Business

Date Written: December 17, 2021

Abstract

We document a robust, negative relation between corporate environmental and social (ES) performance and corporate bond issue spreads, even after controlling for ratings and other firm characteristics. Consistent with our theoretical model, this relation is due to bonds rated BBB or below, with spread-reductions of up to 98 basis points. These effects are predominantly related to product and employee scores. We do not find time trends for the ES-spread relation but document strong supply effects, as the share of issuers with good ES ratings has increased substantially. Finally, we provide evidence for a negative ES-credit-risk link.

Keywords: corporate bond market, credit risk, corporate social responsibility, ESG

JEL Classification: G11, G12, G32, G34

Suggested Citation

Halling, Michael and Yu, Jin and Zechner, Josef, Primary Corporate Bond Markets and Social Responsibility (December 17, 2021). Swedish House of Finance Research Paper No. 20-13, Available at SSRN: https://ssrn.com/abstract=3681666 or http://dx.doi.org/10.2139/ssrn.3681666

Michael Halling

University of Luxembourg ( email )

L-1511 Luxembourg
Luxembourg

Jin Yu (Contact Author)

Monash University -Department of Banking and Finance ( email )

Melbourne
Australia
+61 3 99034590 (Phone)

HOME PAGE: http://sites.google.com/site/jinyufinecon/

Josef Zechner

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien A-1019
Austria

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