Green Certification, Credit Rating, and Mainland Chinese Green Bonds in Hong Kong

This chapter discusses green certification and credit rating on Mainland Chinese green bonds in Hong Kong. These green bonds are mostly denominated in USD, distributed to global investors, and issued with international practices of green certification and credit rating. Using qualitative analysis and case study method, the chapter finds four external reviewers sharply different in their assessment framework although they attempt to assess degree of compliance of a bond issuance or a bond issuer with some international green standards. All the three global credit rating agencies claim their incorporation of green assessment into their credit rating process. However, the chapter finds no clear evidence on such claim from their credit rating comments on selected bond issuers.

Detailed Guidance for Issuing Green Bonds in Developing Countries

This guidance note aims to help bond issuers and their advisors to understand the process and key considerations for a successful green bond issuance. Demand for green bonds and other sustainable finance products is increasing rapidly, and issuers are seeing an opportunity to be part of the green bond market. This publication covers all the steps required to follow best practices in labeling bonds as green. It includes examples, links to further details, and key resources for green bond issuers and their deal teams.

Balance Sheet Channel of Monetary Policy: Evidence from Credit Spreads of Russian Firms

In this paper, I analyse the relationship between the credit spreads of Russian bond issuers and monetary policy shocks. According to the theory of demand-side financial imperfections, in the presence of financial frictions, the higher the net worth of a firm, the lower its external finance premium. The theory of the balance sheet channel of monetary policy suggests that monetary shocks may affect the net worth of a firm through debt outflows. Together, these ideas predict that the external finance premium of more indebted companies is more sensitive to monetary policy shocks. However, my empirical findings from the credit spreads of Russian companies do not support this theory.

Transition bonds market will grow from slow start

Significance Lack of clarity over standards has held back transition bonds, but the rising imperative to reduce the carbon footprint of the most polluting firms in the coming years could provide impetus. This applies particularly to emerging economies. Impacts ESG-focused investors are likely to continue favouring green bonds over transition bonds as the latter means investing in brown sectors. ‘Transition washing’ (similar to ‘greenwashing’ among green bond issuers) will remain a problem. Investors will demand clear goals from issuers, further blurring the boundaries between transition bonds and sustainability-linked bonds. Recent developments suggest that the market for transition bonds could grow particularly fast in Asia Pacific.

The role of financial factors and non-financial factors on corporate bond and sukuk rating Indonesia

Purpose This study aims to analyze the determinants of ratings of corporate bonds and sukuk issued by firms listed on the Indonesia Stock Exchange (IDX) for the 2013–2019 period. Design/methodology/approach This study uses a quantitative approach by testing hypotheses and using logistic regression. Ordinal logistic endogenous (or dependent) variables (Y) in ordinal logistics use data in the form of levels (ordinal scale). Independent (or exogenous) variables (X), include financial and non-financial factors for dependent (or endogenous) variables (Y), namely, of corporate bonds and sukuk ratings. There are two approaches to the study they are Logit and Gompit (Negative Log-Log. The population of the study is Indonesian companies listed on the IDX that issued bonds and sukuk for the 2013–2019 periods. The sampling technique is purposive. In total, 16 corporate companies adhering to the above criteria and issuing bonds and sukuk were chosen. In total, 270 types of bonds and 280 types of sukuk were selected as samples. Findings The results of the Logit and Gompit regression show that leverage ratio, firm size, security structure and maturity date are important determinants of corporate bond ratings while profitability and liquidity ratios appear to have no influence on the rating. In the case of sukuk, profitability, liquidity and maturity date play important roles in influencing the corporate sukuk rating. However, there is no evidence to suggest that leverage ratio, company size and security structure may affect sukuk ratings. Research limitations/implications For both sukuk and bond issuers, it is necessary to pay attention to the factors that may affect the ratings. Specifically, Sukuk issuers need to pay attention to the return of asset, current ratio, growth and structure. On the other hand, bond issuers need to consider depth to equity, structure and maturity. As for investors, the findings of this study reveal that both bond and sukuk ratings reflect their performance. Practical implications This study provides useful information for investors that allows them to assess the risk of sukuk or bonds chosen based on rating and financial performance. Originality/value The novelty of this study lies in its econometric methodology used to identify factors which influence sukuk and bond ratings. Specifically, this study used two different techniques that allow a robust conclusion to be drawn. Furthermore, this study provides a systematic analysis which allows comparison between factors which affect bond and sukuk ratings in Indonesia.

Does regulatory enforcement improve continuing disclosure? The municipal securities market case of the Municipalities Continuing Disclosure Cooperation (MCDC) initiative

PurposeThis paper analyzes the impact of increased federal regulatory enforcement from the SEC's Municipalities Continuing Disclosure Cooperation (MCDC) initiative on municipal debt issuers continuing disclosure practices.Design/methodology/approachWe analyze the changes in continuing disclosure practices by estimating a series of difference-in-differences regressions based on variables representing issuers' changes in regulatory risk after the MCDC. The continuing disclosure data are hand-collected for 827 cities over a seven-year period.FindingsThe empirical findings indicate that increased regulatory enforcement has a significant impact on continuing disclosure compliance. We find increased enforcement has no impact on issuers that already have a higher probability of being monitored by federal regulators. We also find that an increase in continuing disclosure compliance does not automatically increase continuing disclosure timeliness.Practical implicationsThe MCDC lacks monetary penalties for noncompliant bond issuers and no direct regulatory consequences exist for untimely disclosure. Our findings suggest that regulatory enforcement should be followed by adequate sanctions to emphasize the credibility of the enforcement threat and the SEC should consider requiring bond issuers to commit to the timely disclosure of significant information in offering documents.Originality/valueThis paper extends prior studies by analyzing regulatory risk in the market, and the ability of regulation to reduce disclosure compliance deficiencies in the municipal market. By focusing on the MCDC, this study is able to disentangle the impact of regulatory enforcement from the changes in accounting regulation.

The Effect of the Bank Indonesia Interest Rate, Exchange Rate, and Bond Rating against Bond Yield: Registered Corporate Bonds Issuing Company on the Indonesia Stock Exchange

In the current development of the world economic system, movements in the financial system that occur in the world are also affected. Judging from the development of the financial system, it is inseparable from banking, which is an absolute part of it. This condition was reflected in the state of Indonesia during the economic and monetary crisis. This research is a quantitative study with a descriptive analysis approach. The data source is in the form of secondary data obtained from the BEI IBMD 2017-2020. The documentation technique is the data collection technique in this research. All corporate bond issuers listed on the IDx for the 2017-2020 period are the population used in this study. The collection of the samples uses a deliberate sample. In this study the analysis utilizes the determination coefficient, multiple analyzes for linear regression and self-relation. From the above results of discussion and analysis, we can conclude that: 1) the BI rate variable in Indonesia affects bond returns positively and in a significant way in corporate-bond issuing companies; 2) the BT variable affects bond yields in corporate-binding companies; and 3) the BTV has a negative and meaningful effect on bond yields in corporated-bond issuing companies.

Sustainable Issuer versus Sustainable Issuance: Providing Public Issuers of Sustainable Bonds in Latin America and the Caribbean with Insight into the Nascent Universe of ESG Ratings

Based on recent works and experiences from issuers in Latin America and the Caribbean, and complemented by interviews of experts, this study provides public issuers with insight and encouragement to engage into the nascent world of environmental, social, and governance (ESG) evaluations and assessments, ratings, scoring, and profiles. Increasingly, investors are integrating ESG into their decision-making processes for various reasons, including risk-return considerations, client mandates, disclosure commitments, and regulatory requirements. Although an increasing number of investors have ESG investing strategies and responsible investment policies in place, ESG factors have primarily been integrated into decision making in equity rather than fixed income portfolios. Few investors have a systemic approach to ESG integration in debt portfolios, especially in sovereign debt. Their number is growing, however, and investors increasingly are demanding ESG ratings of bond issuers, especially thematic bond issuers, whether corporate or sovereign.

Corporate Bankruptcy and Directors’ Reputation: An Empirical Analysis of the Effects on Public Debt Contracts

This article investigates the link between board members’ past professional experiences and the terms and conditions of the debt contracts of their current firms. In particular, we examine whether directors’ past bankruptcy experience affects the pricing and nonpricing terms of public debt contracts. Using a sample of 8,142 bond issues in the United States in the period 1995 to 2015, we document higher credit spreads and smaller bond sizes for firms with such directors, suggesting that bondholders are concerned about past bankruptcy experience. Our results remain robust to different model specifications. This effect is moderated for bankruptcies that are likely driven by macroeconomic shocks such as the dotcom bubble and the global financial crisis. We also show that our findings are not explained by bond issuers with an elevated risk of default and seem instead to be driven by directors serving on key monitoring committees, indicating that prior bankruptcy experience raises concerns about the company’s corporate governance. Finally, mediation analysis offers some evidence of a limited negative indirect effect of prior bankruptcy experience on the terms of debt contracts through the firm’s financial and investment policies. Overall, our findings suggest that lenders incorporate information about past professional experiences of directors into public debt contracting.