Carbon Emissions, Mutual Fund Trading, and the Liquidity of Corporate Bonds

• 成果类型: Article; Early Access
• 署名作者: Cao, Jie; Li, Yi; Zhan, Xintong; Zhang, Weiming; Zhou, Linyu
• 署名单位: Hong Kong Polytechnic University; Federal Reserve System - USA; Federal Reserve System Board of Governors; Fudan University; IE University; Central University of Finance & Economics
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2023.01867
• 发表日期: 2025
• 关键词: climate risks; carbon emissions; Corporate bonds; Mutual funds; redemption risks; liquidity

摘要

This paper investigates the effect of climate risks on corporate bond mutual funds' trading activities and explores its mechanism. We find that investor flows negatively respond to mutual funds' carbon exposure, using the Paris Agreement as a shock event. Such carbon-induced redemptions prompt mutual funds to sell bonds issued by highcarbon companies, especially for funds with high outflow-to-carbon sensitivity. Our findings do not support the alternative hypothesis that a fundamental shift in funds' investment preferences drives the reduction in high-carbon holdings. Finally, we document a deterioration in the liquidity of high-carbon bonds, particularly those heavily owned by mutual funds.