ESG scores are essential information tools in the capital market, but prior study has not fully discussed the effect and internal mechanism of ESG scores on bond investors’ risk pricing in the primary market. The purpose of this study is to investigate the relationship between the ESG scores and risk premium of bond issuance based on the sample of Chinese listed corporations. We find that when ESG scores of the bond issuer are higher, the investors will require a lower risk premium. The result indicates that ESG scores already have positive information effect in Chinese primary bond market. Furthermore, we make mechanism and heterogeneity tests to prove that ESG scores can provide investors with incremental information, which is helpful for bond investors to identify risks and price effectively. Our study in the context of the emerging economy of China examines the incremental information value of ESG scores for bond investors, and provides evidence for the application of sustainable development concepts in global capital markets.

Existing studies generally recognize the critical role played by macro monetary policy, of which the uncertainty will increase corporate bond issuance premiums at a micro level. However, relatively little is known about these relationships from the perspective of non-financial information in corporation. So this study set out to do further exploration. We use the database to obtain information, including the bond issuance of A-share listed corporations in China during 2015 to 2020. The findings suggest that high environmental, social, and governance (ESG) ratings from listed corporations significantly weaken the positive correlation between monetary policy uncertainty and bond issuance premiums. Specifically, it has a positive information pricing effect on China's primary debt issuance market, as well as a mitigating impact on macro financial policy risk. We also find, through further mechanistic studies, that ESG ratings are more helpful in undermining the impact of monetary policy uncertainty on bond issuance premiums in the context of higher financial information quality. Our findings are conducive to enriching the research framework of the economic consequences of ESG ratings, meaningfully influencing the growing literature that exposed the mechanism of bond issuance premiums, and further, verifying the interaction of information at different levels (macro vs micro) in asset pricing.

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Existing studies generally recognize the critical role played by macro monetary policy, of which the uncertainty will increase corporate bond issuance premiums at a micro level. However, relatively little is known about these relationships from the perspective of non-nancial information in corporation. So this study set out to do further exploration. We use the database to obtain information, including the bond issuance of A-share listed corporations in China during 2015 to 2020. The ndings suggest that high environmental, social, and governance (ESG) ratings from listed corporations signi cantly weaken the positive correlation between monetary policy uncertainty and bond issuance premiums. Speci cally, it has a positive information pricing effect on China's primary debt issuance market, as well as a mitigating impact on macro nancial policy risk. We also nd, through further mechanistic studies, that ESG ratings are more helpful in undermining the impact of monetary policy uncertainty on bond issuance premiums in the context of higher nancial information quality. Our ndings are conducive to enriching the research framework of the economic consequences of ESG ratings, meaningfully in uencing the growing literature that exposed the mechanism of bond issuance premiums, and further, verifying the interaction of information at different levels (macro vs micro) in asset pricing.

No abstract