ESG performance and bond return volatility

Zehua Zhang; Ran Zhao; Lu Zhu; Trevor W. Chamberlain

doi:10.1016/j.jfs.2025.101434

Journal of Financial Stability Vol. 79 2025

ESG performance and bond return volatility

Zehua Zhang^1,2; Ran Zhao³; Lu Zhu⁴; Trevor W. Chamberlain⁵

¹ Hunan University · ² Hunan University of Finance and Economics · ³ San Diego State University · ⁴ California State University, Long Beach · ⁵ McMaster University

open access

Abstract

This study examines the effects of environmental, social, and governance (ESG) performance on bond return volatility. After controlling for bond characteristics and firm fundamentals, we find a robust positive relationship between ESG performance and bond return volatility. The empirical results demonstrate that the impact on bond return volatility is primarily driven by ESG strengths rather than concerns. The results are robust to alternative measures, sample periods, and endogeneity controls. Furthermore, the effect of ESG performance is more pronounced for firms with opportunistic managers and poor information environments.

DOI: 10.1016/j.jfs.2025.101434
Volume: 79
Pages: 101434
Language: en
Sources: bibtex:phds-export.bib openalex crossref

ESG performance and bond return volatility

Abstract

Cite