The financial cost of the net-zero transition: Green-premium effects of corporate transition-risk disclosure

The disclosure of corporate net-zero transition risk information has increasingly become a core factor for investors in evaluating bond credit risk. Using a sample of Chinese A-share listed firms that issued bonds between 2008 and 2023, this study focuses on the specific dimension of “net-zero transition risk.” By applying natural language processing techniques in combination with a manually curated lexicon of net-zero transition risk terms, we quantify the level of disclosure in corporate annual reports and empirically examine its impact mechanism on bond credit spreads. The results indicate that a one-unit increase in the disclosure level of net-zero transition risk information is associated with an average rise of 0.274 %age points in bond credit spreads. Further analysis reveals that internal cash ratio, external financing capacity, and debt default risk are the primary transmission mechanisms through which disclosure affects spreads. Heterogeneity tests demonstrate that the amplifying effect of risk disclosure on credit spreads is more pronounced among firms with lower supply-chain concentration, weaker internal control quality, and lower levels of marketization. This study contributes to the literature on net-zero transition and financial markets, and offers theoretical support for the application of signaling theory and risk preference theory in the context of net-zero transition practices.