← Search

Journal of Banking & Finance Vol. 98 2019

Sovereign bond yield spreads and sustainability: An empirical analysis of OECD countries

Gunther Capelle-Blancard; Patricia Crifo1,2,3; Marc-Arthur Diaye4,5; Rim Oueghlissi6; Bert Scholtens7

1 École Polytechnique · 2 EconomiX · 3 Center for Interuniversity Research and Analysis on Organizations · 4 Centre d'Économie de la Sorbonne · 5 Université Paris 1 Panthéon-Sorbonne · 6 University of Jendouba · 7 University of St Andrews

open access

Abstract

We study whether and how a country's environmental, social, and governance (ESG) performance relates to its sovereign borrowing costs in international capital markets. We hypothesize that good ESG performance plays an economic role: It signals a country's commitment to sustainability and long-term orientation and is a buffer against negative shocks, leading to lower sovereign bond yield spreads. Using a sample of 20 OECD countries over the period 1996–2012, we show that countries with good ESG performance are associated with lower default risk and lower sovereign bond yield spreads. Moreover, we show that the social and governance dimensions have a significant negative association with sovereign bond yield spreads, whereas the environmental dimension does not.

DOI
10.1016/j.jbankfin.2018.11.011
Volume
98
Pages
156-169
Language
en
Sources
openalex crossref bibtex:phds-export.bib

Cite