Exploring Greenium in the Chinese Green Bond Market : Focusing on the Primary Market

Green bonds, as a means of financing environmentally friendly projects, began to be issued in China in 2015, and the issuance amount surged considerably in 2016. This study attempts to analyze the existence of greenium in China's green bond market and its determining factors. The analysis of the existence of greenium based on the issuance data of green bonds in China entails a process of confirming the price discovery function of the Chinese bond market, which specifies the potential social costs by differentiating the coupon rate of bonds. Based on the analysis results, greenium in the Chinese bond market shows statistical significance, albeit the factors that affect its size are mainly the issuance conditions of bonds rather than institutional features, such as third-party verification. This phenomenon is believed to be due to the structural characteristics of the Chinese green bond market based on issuance and investment driven by government policy on the market function. Therefore, the market structure must be changed to recognize the direct and indirect greenium of green bonds and expanded in the capital market through the price discovery function