Corporate pandemic bonds

Purpose This paper aims to investigate why firms issue pandemic bonds. Specifically, it examines whether pandemic bond announcements have shareholder-value implications, whether pandemic bonds are associated with lower financing costs, and what mechanisms underlie these patterns. This study evaluates competing explanations, including signaling, cost-of-capital, pandemic-containment and government-support channels. Design/methodology/approach Using a comprehensive sample of corporate pandemic bonds issued in China during February–April 2020, this study examines stock-market reactions using an event-study methodology. Pricing effects are assessed by matching each pandemic bond to a comparable non-pandemic bond issued by the same firm and estimating yield-spread differences using fixed-effects regressions. Potential mechanisms are explored through analyses of signaling effects, pandemic-containment activities and government support, proxied by state-owned bank participation. Findings Pandemic bond announcements are associated with positive stock-market reactions, with cumulative abnormal returns ranging from 1.33% to 1.71%. Pandemic bonds also exhibit yield spreads that are 8.9–18 basis points lower than those of comparable conventional bonds. Yield discounts are more pronounced when a larger share of bond proceeds is allocated to pandemic-related activities and when state-owned banks participate more actively in bond offerings. Originality/value To the best of the author’s knowledge, this study is among the first to systematically examine the corporate pandemic bond market and its implications for both equity-market reactions and bond pricing. It extends the literature on socially responsible debt beyond green bonds by evaluating a crisis-specific financing instrument. The findings highlight the potential role of state-owned bank participation in lower financing costs and suggest how capital markets may support public-policy objectives during periods of economic and public-health stress.