Trading Through the Shock: Physical Climate Events and Transaction Continuity in China's Corporate Bond Market

Abstract

Physical climate risk can raise expected credit losses without necessarily causing an immediate breakdown in market functioning. This paper studies whether localized extreme-heat and extreme-rain episodes disrupt transaction continuity in China's exchange-traded corporate bond market. Public daily histories for 513 bonds issued by 93 exactly matched listed legal entities are linked to 1,011 issuerspecific weather events across 33 registered-office locations. The original matched event design finds no common deterioration in zero trading, traded-bond share, or reported volume; pooled five-day onesided harm limits are +2.1 percentage points, -1.7 percentage points, and -20.8%, respectively. I add a transaction-latency module that distinguishes a recently observed price from subsequent trading resumption. Among bonds quoted within the preceding 60 market sessions, the difference in 60session resumption probability is +0.1 percentage points against same-date location controls, -1.1 points against an adjacent-year same-bond placebo, and -0.2 points when both adjacent years are averaged. The corresponding one-sided lower harm limits are -3.4, -3.2, and -3.5 points, excluding a decline larger than the existing five-point monitoring candidate in all three designs. Five- and twentysession estimates are less precise. Bounded price-adjustment diagnostics are sensitive to time trend and do not establish prompt price discovery. The evidence supports persistent transaction function in a selected segment, while motivating joint regulatory monitoring of zero trading, price age, and time to resumption.

Author abstract from the research manuscript. Typography and line breaks have been normalized; the linked source may show a different manuscript version.