Investor Confidence Issues in China's Green Bond Market --The example of China's primary and secondary green bond markets

Abstract

Literatures on green marketing suggests that consumers want to buy green products and companies respond to this desire by investing in the development and promotion of eco-friendly products (Lenidou and Skarmeans, 2004). Lenidou and Skarmeans, 2017). However, There is an attitudinal-behavioral gap in terms of consumers' green consumption (Ross and Kapitan,2018), i.e., consumers do not translate environmental awareness into the purchase of green products. This paper transfers this consumer psychology to the green bond market, and attempts to investigate whether the environmental awareness of investors in the primary and secondary markets is successfully translated into green premiums, whether the green premiums reflect the "environmental effects" of the green bonds. This paper refers to the proportion of green bond proceeds invested in green projects as the "environmental effect".

The regression results prove that the green premium in the primary market mainly comes from local government subsidies and the contribution of the local economy. Besides, the green bonds are generally overpriced in the primary market mainly due to the existence of local subsidy policies. In the secondary market, environmental benefits are an important influencing factor of green premium, and investors' environmental awareness is fully translated into green premium. In the secondary market, according to the PVAR model, the green premium, provinces and third-party certification agencies are strongly correlated with environmental effects and give a shock that the environmental effects first rise and then fall and finally tend to zero under the shock of IIGF enactment.