Beyond Green: Impacts of Green Bond Issuance on Conventional Bonds in China

ABSTRACT This paper investigates the impact of green bond issuance on the yield spreads of conventional bonds in China. Using a sample of 1468 corporate bonds and a difference‐in‐differences methodology, we document a significantly persistent reduction of 21 basis points in the yield spreads of existing conventional bonds after the green bond issuance. Our findings support a risk‐based explanation: green bond issuance mitigates the environmental regulatory risks faced by the issuer, thereby reducing the perceived default risk of its conventional bonds. These results highlight the broader financial implications of green bond issuance, extending beyond the direct environmental benefits to influence the pricing and risk profile of conventional debt instruments.