Management climate risk concern and corporate bond credit spread

Abstract

This study constructs management climate risk concern from the perspectives of physical and transitional risk, aiming to add novel proxies for measuring corporate climate risk. Investigating the impact of management climate risk concern on corporate bond credit spread, we find that both management physical and transitional climate risk concern has significantly negative effects the bond credit spread, meaning the stronger the management concern about climate risk, the lower the credit spread of the corporate bonds. In addition, further discussions show management climate risk concern have more negative effects on bond spread particularly for bonds with lower credit ratings, worse environment governance and more attention by analysts. This study provides a new insight to assess climate risk from the perspective of management and enriches the practice of climate risk on corporate bonds.