Despite the growing attention given to the impact of ESG performance on corporate finance, such as debt financing costs, little is known about the underlying mechanism. Hence, we aim to answer this question from the supply chain perspective. We use 19,121 enterprise-year observations of 3585 Chinese A-share listed enterprises over the 2013–2022 period and employ panel data regression models with fixed effects estimation. The empirical results confirm a negative relationship between ESG performance and corporate debt financing costs even after a series of robustness tests. We conclude that good ESG performance effectively reduces debt financing costs with a marginal effect of 0.002. This reduction effect can be achieved through two channels: supplier stability and customer concentration. Heterogeneity analyses further demonstrate that the reduction effect is more pronounced in non-state-owned enterprises and enterprises with low industrial competition. Overall, our findings enrich the understanding of how ESG performance reduces debt financing costs and highlight the importance of supply chain management for enterprises.
{"title":"The impact of ESG performance on debt financing costs from the perspective of supply chain","authors":"Qifa Xu , Changyu Ruan , Cuixia Jiang , Qinna Zhao","doi":"10.1016/j.qref.2025.102064","DOIUrl":"10.1016/j.qref.2025.102064","url":null,"abstract":"<div><div>Despite the growing attention given to the impact of ESG performance on corporate finance, such as debt financing costs, little is known about the underlying mechanism. Hence, we aim to answer this question from the supply chain perspective. We use 19,121 enterprise-year observations of 3585 Chinese A-share listed enterprises over the 2013–2022 period and employ panel data regression models with fixed effects estimation. The empirical results confirm a negative relationship between ESG performance and corporate debt financing costs even after a series of robustness tests. We conclude that good ESG performance effectively reduces debt financing costs with a marginal effect of 0.002. This reduction effect can be achieved through two channels: supplier stability and customer concentration. Heterogeneity analyses further demonstrate that the reduction effect is more pronounced in non-state-owned enterprises and enterprises with low industrial competition. Overall, our findings enrich the understanding of how ESG performance reduces debt financing costs and highlight the importance of supply chain management for enterprises.</div></div>","PeriodicalId":47962,"journal":{"name":"Quarterly Review of Economics and Finance","volume":"104 ","pages":"Article 102064"},"PeriodicalIF":3.1,"publicationDate":"2025-10-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145363384","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-10-19DOI: 10.1016/j.qref.2025.102063
Helder Ferreira de Mendonça , Daniel Pereira dos Anjos , Ricardo Ramalhete Moreira
This paper proposes a novel measure to gauge market expectations of fiscal commitment and shows that such expectations significantly affect the market’s short- and medium-term expectations for the public debt-to-GDP ratio. We develop a Fiscal Commitment Index for Brazil, which extracts the government’s long-term adherence to fiscal sustainability from a fiscal reaction function using the Kalman filter. Empirically, we demonstrate that an increase in fiscal commitment leads to a reduction in debt expectations, particularly in a high public debt environment. The analysis further reveals that strengthened commitment reduces the volatility and the dispersion between optimism and pessimism in market expectations. Finally, we identify an asymmetric effect: deteriorations in fiscal commitment worsen expectations more severely than improvements do, especially under high debt. The findings underscore that credible long-term fiscal commitment is a critical determinant of market sentiment regarding public debt.
{"title":"The impact of government behavior on debt market expectations","authors":"Helder Ferreira de Mendonça , Daniel Pereira dos Anjos , Ricardo Ramalhete Moreira","doi":"10.1016/j.qref.2025.102063","DOIUrl":"10.1016/j.qref.2025.102063","url":null,"abstract":"<div><div>This paper proposes a novel measure to gauge market expectations of fiscal commitment and shows that such expectations significantly affect the market’s short- and medium-term expectations for the public debt-to-GDP ratio. We develop a Fiscal Commitment Index for Brazil, which extracts the government’s long-term adherence to fiscal sustainability from a fiscal reaction function using the Kalman filter. Empirically, we demonstrate that an increase in fiscal commitment leads to a reduction in debt expectations, particularly in a high public debt environment. The analysis further reveals that strengthened commitment reduces the volatility and the dispersion between optimism and pessimism in market expectations. Finally, we identify an asymmetric effect: deteriorations in fiscal commitment worsen expectations more severely than improvements do, especially under high debt. The findings underscore that credible long-term fiscal commitment is a critical determinant of market sentiment regarding public debt.</div></div>","PeriodicalId":47962,"journal":{"name":"Quarterly Review of Economics and Finance","volume":"104 ","pages":"Article 102063"},"PeriodicalIF":3.1,"publicationDate":"2025-10-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145363385","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-10-19DOI: 10.1016/j.qref.2025.102067
Yufei Gan
Amidst an escalating global biodiversity crisis and a proliferation of corporate environmental claims, this study addresses a critical gap between symbolic corporate communication and its substantive ecological impact. We establish a causal link between corporate greenwashing and increased biodiversity risk using a panel of 17,076 firm-year observations for Chinese listed companies from 2015 to 2024. To ensure robust causal inference, we employ a rigorous identification strategy centered on a Multiple-Difference-in-Differences (M-DID) design, which is complemented by Propensity Score Matching (PSM), an Instrumental Variable (IV) approach, and placebo tests. Our findings reveal that greenwashing causally increases biodiversity risk through a dual-pathway mechanism. Internally, it fosters a "green technology innovation bubble," prioritizing patent quantity over quality. Externally, it degrades "environmental disclosure quality," shielding harmful operations from scrutiny. This detrimental relationship is attenuated by CEOs with green experience but exacerbated by managerial myopia. Our research bridges a crucial theoretical divide between impression management and real-world ecological outcomes, offering vital insights for regulators and investors seeking to curb specious environmentalism.
{"title":"When green claims turn brown: The Impact of corporate greenwashing on biodiversity risk in China","authors":"Yufei Gan","doi":"10.1016/j.qref.2025.102067","DOIUrl":"10.1016/j.qref.2025.102067","url":null,"abstract":"<div><div>Amidst an escalating global biodiversity crisis and a proliferation of corporate environmental claims, this study addresses a critical gap between symbolic corporate communication and its substantive ecological impact. We establish a causal link between corporate greenwashing and increased biodiversity risk using a panel of 17,076 firm-year observations for Chinese listed companies from 2015 to 2024. To ensure robust causal inference, we employ a rigorous identification strategy centered on a Multiple-Difference-in-Differences (M-DID) design, which is complemented by Propensity Score Matching (PSM), an Instrumental Variable (IV) approach, and placebo tests. Our findings reveal that greenwashing causally increases biodiversity risk through a dual-pathway mechanism. Internally, it fosters a \"green technology innovation bubble,\" prioritizing patent quantity over quality. Externally, it degrades \"environmental disclosure quality,\" shielding harmful operations from scrutiny. This detrimental relationship is attenuated by CEOs with green experience but exacerbated by managerial myopia. Our research bridges a crucial theoretical divide between impression management and real-world ecological outcomes, offering vital insights for regulators and investors seeking to curb specious environmentalism.</div></div>","PeriodicalId":47962,"journal":{"name":"Quarterly Review of Economics and Finance","volume":"104 ","pages":"Article 102067"},"PeriodicalIF":3.1,"publicationDate":"2025-10-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145417297","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-10-10DOI: 10.1016/j.qref.2025.102060
Divya P. Tulsyan , Mayank Joshipura , Anil V. Mishra
This study investigates the presence of a risk anomaly in the Indian stock market and examines whether profitability can explain this anomaly. Using Nifty 500 index companies from March 2003 to June 2022, the study concludes that: a) the risk anomaly is present in the Indian stock markets and manifests in the form of a lack of a risk-return relationship; b) higher profitability enhances absolute and risk-adjusted performance; c) high-volatility stocks tend to have lower profitability, while low-volatility stocks often exhibit higher profitability; d) the positive risk-return relationship is not restored after controlling for profitability; e) after accounting for profitability, the risk anomaly moderates but still fails to resolve the puzzle. The study is relevant for investors, scholars, and money managers, and it offers insights into the existing debate on the role of profitability in the emerging market context.
{"title":"Does profitability explain the low-risk anomaly in India?","authors":"Divya P. Tulsyan , Mayank Joshipura , Anil V. Mishra","doi":"10.1016/j.qref.2025.102060","DOIUrl":"10.1016/j.qref.2025.102060","url":null,"abstract":"<div><div>This study investigates the presence of a risk anomaly in the Indian stock market and examines whether profitability can explain this anomaly. Using Nifty 500 index companies from March 2003 to June 2022, the study concludes that: a) the risk anomaly is present in the Indian stock markets and manifests in the form of a lack of a risk-return relationship; b) higher profitability enhances absolute and risk-adjusted performance; c) high-volatility stocks tend to have lower profitability, while low-volatility stocks often exhibit higher profitability; d) the positive risk-return relationship is not restored after controlling for profitability; e) after accounting for profitability, the risk anomaly moderates but still fails to resolve the puzzle. The study is relevant for investors, scholars, and money managers, and it offers insights into the existing debate on the role of profitability in the emerging market context.</div></div>","PeriodicalId":47962,"journal":{"name":"Quarterly Review of Economics and Finance","volume":"104 ","pages":"Article 102060"},"PeriodicalIF":3.1,"publicationDate":"2025-10-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145267522","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-09-30DOI: 10.1016/j.qref.2025.102059
Jinlei Li , Yuanbiao Huang
This study explores how the housing purchase restriction (HPR) in China affects corporate employment. Using a staggered difference-in-differences approach, we present strong evidence that the policy has positive effects on corporate employment. The effect is more significant among firms with lower financing constraint and higher labor intensity, and firms in cities with better credit availability and more abundant labor supply. Mechanism tests reveal that the HPR policy reduces real estate investment and increases productive investments. Furthermore, we discuss the effects of this policy on firms’ employment structure and city-level employment.
{"title":"Housing purchase restriction and corporate employment: Evidence from China","authors":"Jinlei Li , Yuanbiao Huang","doi":"10.1016/j.qref.2025.102059","DOIUrl":"10.1016/j.qref.2025.102059","url":null,"abstract":"<div><div>This study explores how the housing purchase restriction (HPR) in China affects corporate employment. Using a staggered difference-in-differences approach, we present strong evidence that the policy has positive effects on corporate employment. The effect is more significant among firms with lower financing constraint and higher labor intensity, and firms in cities with better credit availability and more abundant labor supply. Mechanism tests reveal that the HPR policy reduces real estate investment and increases productive investments. Furthermore, we discuss the effects of this policy on firms’ employment structure and city-level employment.</div></div>","PeriodicalId":47962,"journal":{"name":"Quarterly Review of Economics and Finance","volume":"104 ","pages":"Article 102059"},"PeriodicalIF":3.1,"publicationDate":"2025-09-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145221124","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-09-30DOI: 10.1016/j.qref.2025.102058
Ufuk Can , Turalay Kenc , Emrah Ismail Cevik
This paper investigates the transmission mechanisms of high policy rate volatility episodes in Türkiye, characterized by sharp and unpredictable interest rate fluctuations. Focusing on the bank lending channel, we employ a time-varying parameter structural vector autoregression with stochastic volatility model to analyze the evolving impact of monetary policy on bank lending. Our analysis examines several key aspects: the relative effectiveness of a single, large policy rate change compared to a series of gradual adjustments; the potential non-linearity of transmission, investigating whether tight or lax monetary policy exhibits greater effectiveness; and the differential responses of rate-based conventional banks and profit-loss-sharing Islamic banks to monetary policy shocks. The key findings indicate that the effectiveness of the bank lending channel varies with the nature and magnitude of monetary policy shocks. Notably, episodes of substantial monetary tightening, especially when coupled with significant exchange rate depreciation, exert a more pronounced dampening effect on lending activity. Furthermore, Islamic banks are more sensitive to policy shocks, largely because of their distinct reliance on profit-sharing arrangements and liquidity-dependent funding models.
{"title":"Bank lending channel under high policy rate volatility: Evidence from Türkiye","authors":"Ufuk Can , Turalay Kenc , Emrah Ismail Cevik","doi":"10.1016/j.qref.2025.102058","DOIUrl":"10.1016/j.qref.2025.102058","url":null,"abstract":"<div><div>This paper investigates the transmission mechanisms of high policy rate volatility episodes in Türkiye, characterized by sharp and unpredictable interest rate fluctuations. Focusing on the bank lending channel, we employ a time-varying parameter structural vector autoregression with stochastic volatility model to analyze the evolving impact of monetary policy on bank lending. Our analysis examines several key aspects: the relative effectiveness of a single, large policy rate change compared to a series of gradual adjustments; the potential non-linearity of transmission, investigating whether tight or lax monetary policy exhibits greater effectiveness; and the differential responses of rate-based conventional banks and profit-loss-sharing Islamic banks to monetary policy shocks. The key findings indicate that the effectiveness of the bank lending channel varies with the nature and magnitude of monetary policy shocks. Notably, episodes of substantial monetary tightening, especially when coupled with significant exchange rate depreciation, exert a more pronounced dampening effect on lending activity. Furthermore, Islamic banks are more sensitive to policy shocks, largely because of their distinct reliance on profit-sharing arrangements and liquidity-dependent funding models.</div></div>","PeriodicalId":47962,"journal":{"name":"Quarterly Review of Economics and Finance","volume":"104 ","pages":"Article 102058"},"PeriodicalIF":3.1,"publicationDate":"2025-09-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145267527","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-09-26DOI: 10.1016/j.qref.2025.102056
Xuan Minh Thuy Nguyen , Ying Wang , Albert Acheampong
This study examines the impact of banking depth on economic performance in 47 Asian economies from 1980 to 2022, with a focus on the mediating role of institutional governance. Using feasible generalized least squares (FGLS) models and structural equation modelling (SEM), we find that banking depth positively affects both economic development (GDP per capita) and growth (ΔGDPPC). Institutional governance—measured by government effectiveness, regulatory quality, and political stability—enhances this relationship, underscoring the importance of institutional context in Asia. Specifically, control of corruption, rule of law, and voice and accountability fully mediate the impact of banking depth on economic growth, suggesting that improvements in banking depth alone are insufficient without strong institutional support. Additionally, the results highlight the nuanced role of institutional quality across different income groups: while economic growth in higher-income countries is broadly supported by institutional quality, these same governance structures may not optimally enhance the positive impacts of banking depth and size development on the economy. In contrast, the effects of banking on growth in lower-income countries become volatile when institutional quality is considered, emphasizing the need for targeted institutional reforms. Our findings contribute to the existing literature and highlight the need for tailored institutional reforms to maximize the economic benefits of financial sector development and institutional strengthening in Asia.
{"title":"The mediating effect of institutional governance on banking depth and economic performance","authors":"Xuan Minh Thuy Nguyen , Ying Wang , Albert Acheampong","doi":"10.1016/j.qref.2025.102056","DOIUrl":"10.1016/j.qref.2025.102056","url":null,"abstract":"<div><div>This study examines the impact of banking depth on economic performance in 47 Asian economies from 1980 to 2022, with a focus on the mediating role of institutional governance. Using feasible generalized least squares (FGLS) models and structural equation modelling (SEM), we find that banking depth positively affects both economic development (GDP per capita) and growth (ΔGDPPC). Institutional governance—measured by government effectiveness, regulatory quality, and political stability—enhances this relationship, underscoring the importance of institutional context in Asia. Specifically, control of corruption, rule of law, and voice and accountability fully mediate the impact of banking depth on economic growth, suggesting that improvements in banking depth alone are insufficient without strong institutional support. Additionally, the results highlight the nuanced role of institutional quality across different income groups: while economic growth in higher-income countries is broadly supported by institutional quality, these same governance structures may not optimally enhance the positive impacts of banking depth and size development on the economy. In contrast, the effects of banking on growth in lower-income countries become volatile when institutional quality is considered, emphasizing the need for targeted institutional reforms. Our findings contribute to the existing literature and highlight the need for tailored institutional reforms to maximize the economic benefits of financial sector development and institutional strengthening in Asia.</div></div>","PeriodicalId":47962,"journal":{"name":"Quarterly Review of Economics and Finance","volume":"104 ","pages":"Article 102056"},"PeriodicalIF":3.1,"publicationDate":"2025-09-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145465851","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-09-24DOI: 10.1016/j.qref.2025.102057
Rudra P. Pradhan , S.M.R.K. Samarakoon , B.A.C.H. Wijesinghe , Rana P. Maradana
This study investigates the association between the readability and tonal quality of annual reports, and corporate dividend payout policies in the Indian context, using a comprehensive dataset from 2012 to 2022. Applying detailed analysis and sophisticated statistical models, including Tobit and METobit regression techniques, to 10,085 firm-year observations, we ensured the robustness and reliability of the findings. The results reveal a significant association between the readability of corporate annual reports and corporate payouts. Specifically, firms whose annual reports are characterized by low readability tend to pay out smaller dividends. Moreover, if the narrative tone in annual reports leans towards negativity, litigiousness, uncertainty, or weak modal case, there is a significant negative association with the size and frequency of dividend payouts. The results underscore that the presence or absence of clear, comprehensible financial reporting with a positive tone is aligned with firms’ corporate payout policies. The findings add to the expanding body of research on the textual characteristics of financial disclosure and their corresponding economic consequences, confirming the necessity for transparent and readable financial reporting. The findings of this study hold implications for investors, corporate managers, and policymakers, who need to understand the strategic importance of clarity and tone in financial communications.
{"title":"Clear or confusing? How financial report readability and tone are associated with dividend payouts in Indian corporations","authors":"Rudra P. Pradhan , S.M.R.K. Samarakoon , B.A.C.H. Wijesinghe , Rana P. Maradana","doi":"10.1016/j.qref.2025.102057","DOIUrl":"10.1016/j.qref.2025.102057","url":null,"abstract":"<div><div>This study investigates the association between the readability and tonal quality of annual reports, and corporate dividend payout policies in the Indian context, using a comprehensive dataset from 2012 to 2022. Applying detailed analysis and sophisticated statistical models, including Tobit and METobit regression techniques, to 10,085 firm-year observations, we ensured the robustness and reliability of the findings. The results reveal a significant association between the readability of corporate annual reports and corporate payouts. Specifically, firms whose annual reports are characterized by low readability tend to pay out smaller dividends. Moreover, if the narrative tone in annual reports leans towards negativity, litigiousness, uncertainty, or weak modal case, there is a significant negative association with the size and frequency of dividend payouts. The results underscore that the presence or absence of clear, comprehensible financial reporting with a positive tone is aligned with firms’ corporate payout policies. The findings add to the expanding body of research on the textual characteristics of financial disclosure and their corresponding economic consequences, confirming the necessity for transparent and readable financial reporting. The findings of this study hold implications for investors, corporate managers, and policymakers, who need to understand the strategic importance of clarity and tone in financial communications.</div></div>","PeriodicalId":47962,"journal":{"name":"Quarterly Review of Economics and Finance","volume":"104 ","pages":"Article 102057"},"PeriodicalIF":3.1,"publicationDate":"2025-09-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145159118","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-09-23DOI: 10.1016/j.qref.2025.102052
Guangyi Yang , Chun Tang , Xiaoxing Liu
The uneven regional development of China’s carbon market draws our attention to the issue of efficiency connectivity within this market. Whether the market sets an exemplary standard or leads to the displacement of efficient players by less efficient ones is critical to determining if China can achieve its ambitious dual-carbon goals. Based on time-varying connectivity methods, this study constructs a connectivity network for the efficiency of China’s carbon market, with a focus on examining the network’s connectivity characteristics and driving factors. The results indicate the presence of a “tidal” trading phenomenon within the Chinese carbon market, where market efficiency experiences a reversal before and after compliance periods. Within the connectivity network formed by the carbon markets, there is an information spillover from highly efficient to less efficient markets, primarily driven by short-term factors. A mechanism analysis shows that the enhancement of efficiency connectivity is closely linked to events in the national carbon market, which elevate market attention, increase trading activity, and thereby strengthen efficiency connectivity between markets. Further analysis reveals that following the establishment of the national carbon market, total efficiency connectivity has increased significantly, prompting structural changes in the pilot carbon markets under its guidance.
{"title":"The power of role models: A study on the efficiency connectedness of carbon markets","authors":"Guangyi Yang , Chun Tang , Xiaoxing Liu","doi":"10.1016/j.qref.2025.102052","DOIUrl":"10.1016/j.qref.2025.102052","url":null,"abstract":"<div><div>The uneven regional development of China’s carbon market draws our attention to the issue of efficiency connectivity within this market. Whether the market sets an exemplary standard or leads to the displacement of efficient players by less efficient ones is critical to determining if China can achieve its ambitious dual-carbon goals. Based on time-varying connectivity methods, this study constructs a connectivity network for the efficiency of China’s carbon market, with a focus on examining the network’s connectivity characteristics and driving factors. The results indicate the presence of a “tidal” trading phenomenon within the Chinese carbon market, where market efficiency experiences a reversal before and after compliance periods. Within the connectivity network formed by the carbon markets, there is an information spillover from highly efficient to less efficient markets, primarily driven by short-term factors. A mechanism analysis shows that the enhancement of efficiency connectivity is closely linked to events in the national carbon market, which elevate market attention, increase trading activity, and thereby strengthen efficiency connectivity between markets. Further analysis reveals that following the establishment of the national carbon market, total efficiency connectivity has increased significantly, prompting structural changes in the pilot carbon markets under its guidance.</div></div>","PeriodicalId":47962,"journal":{"name":"Quarterly Review of Economics and Finance","volume":"104 ","pages":"Article 102052"},"PeriodicalIF":3.1,"publicationDate":"2025-09-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145267525","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-09-23DOI: 10.1016/j.qref.2025.102054
David Dekker , Chih-Yueh Huang , Dimitrios Christopoulos
Financial markets allow a premium to green bond issuers (a.k.a. greenium), which incentivises the transition to green projects. This premium also absorbs costs associated with green bond certification, necessary to prevent greenwashing, and aimed at reducing investors’ uncertainty. Several taxonomies have been created to classify bonds to that end. A question is to what extend are such classifications an effective means as traditional credit ratings serve a similar, more generic purpose? And what is the possible effect on market efficiency of these classifications? An observed variance in green bond premiums across different bond classes would also suggest that charges for the certification of green bonds should vary. Difference in greeniums reveal differences in the way the markets assess distinctive classes of green bonds. Especially, when bond classifications change, or taxonomies are ambiguous this could lead to adverse selection or invite greenwashing. Here we compare 858 pairs of matched green and non-green bonds and use a mixed effects model to estimate how bonds’ greenium differ over credit ratings and ‘Use of Proceeds’ categories. Results show that lower-rated bonds reach higher levels of green premiums, controlling for categorical random effects. Similar effects are found for ‘Use of Proceeds’ classes. However, compared to either of the two other classifications a cross-classification model provides significant improvement, demonstrating the added value of green bond taxonomies for investors. This solves a paradox in the literature that found that high score ESG bonds, but also low credit rated bonds receive a higher premium. The other implication is that market inefficiencies may occur due to segmentation since it is common practice for certification costs to be flat and independent from greenium levels. Counterintuitively, creating a green taxonomy could lead to more uncertainty and adverse selection for “true” green project financing, which would delay the green transition and the desired shift to a low-carbon economy. An implied remedy is to implement differentiated verification charges for green bonds across bond credit ratings.
{"title":"Price of greenness: Classifications and green bond premiums","authors":"David Dekker , Chih-Yueh Huang , Dimitrios Christopoulos","doi":"10.1016/j.qref.2025.102054","DOIUrl":"10.1016/j.qref.2025.102054","url":null,"abstract":"<div><div>Financial markets allow a premium to green bond issuers (a.k.a. greenium), which incentivises the transition to green projects. This premium also absorbs costs associated with green bond certification, necessary to prevent greenwashing, and aimed at reducing investors’ uncertainty. Several taxonomies have been created to classify bonds to that end. A question is to what extend are such classifications an effective means as traditional credit ratings serve a similar, more generic purpose? And what is the possible effect on market efficiency of these classifications? An observed variance in green bond premiums across different bond classes would also suggest that charges for the certification of green bonds should vary. Difference in greeniums reveal differences in the way the markets assess distinctive classes of green bonds. Especially, when bond classifications change, or taxonomies are ambiguous this could lead to adverse selection or invite greenwashing. Here we compare 858 pairs of matched green and non-green bonds and use a mixed effects model to estimate how bonds’ greenium differ over credit ratings and ‘Use of Proceeds’ categories. Results show that lower-rated bonds reach higher levels of green premiums, controlling for categorical random effects. Similar effects are found for ‘Use of Proceeds’ classes. However, compared to either of the two other classifications a cross-classification model provides significant improvement, demonstrating the added value of green bond taxonomies for investors. This solves a paradox in the literature that found that high score ESG bonds, but also low credit rated bonds receive a higher premium. The other implication is that market inefficiencies may occur due to segmentation since it is common practice for certification costs to be flat and independent from greenium levels. Counterintuitively, creating a green taxonomy could lead to more uncertainty and adverse selection for “true” green project financing, which would delay the green transition and the desired shift to a low-carbon economy. An implied remedy is to implement differentiated verification charges for green bonds across bond credit ratings.</div></div>","PeriodicalId":47962,"journal":{"name":"Quarterly Review of Economics and Finance","volume":"104 ","pages":"Article 102054"},"PeriodicalIF":3.1,"publicationDate":"2025-09-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145159117","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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