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

Écarts de rendement des obligations souveraines et durabilité: une analyse empirique des pays de l’OCDE

Gunther Capelle-Blancard, Patricia Crifo, Marc-Arthur Diaye (), Rim Oueghlissi and Bert Scholtens
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Marc-Arthur Diaye: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique
Rim Oueghlissi: UCAR - Université de Carthage (Tunisie)

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

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.

Keywords: ESG performance; Sovereign bonds; Sustainability; Yield spreads (search for similar items in EconPapers)
Date: 2019-01
Note: View the original document on HAL open archive server: https://hal.science/hal-02342867
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Citations: View citations in EconPapers (51)

Published in Journal of Banking and Finance, 2019, 98, pp.156-169. ⟨10.1016/j.jbankfin.2018.11.011⟩

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Journal Article: Sovereign bond yield spreads and sustainability: An empirical analysis of OECD countries (2019)
Working Paper: Sovereign bond yield spreads and sustainability: An empirical analysis of OECD countries (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:cesptp:hal-02342867

DOI: 10.1016/j.jbankfin.2018.11.011

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