Document Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Department

Management

Program Name/Specialization

Finance

Faculty/School

Lazaridis School of Business and Economics

First Advisor

Dr. Madhu Kalimipalli

Advisor Role

Supervisor

Second Advisor

Dr. Jin Wang

Advisor Role

Co-supervisor

Abstract

This dissertation comprises three essays investigating topics on Corporate Bond Short Selling, Climate and Credit Risks.

The first essay addresses the question: Does climate risk influence bond short selling? We address this question by studying how climate risk influences the relationship between corporate bond short selling and subsequent credit default swap (CDS) spreads. We find that future CDS spreads are strongly related to bond short selling for the high climate risk firms. In particular, our fixed effects triple difference-in-differences (DiD) regressions show that sensitivity of subsequent CDS spreads to lagged bond short selling is significantly higher for firms with high regulatory and physical risks in the eight-quarters following the post-Paris Accord of December, 2015. Specifically, the treated firms consist of those in the highest quartile of a given climate risk for the last quarter of 2014, while the control sample firms are propensity score matched lowest quartile firms for that quarter. Our results are robust to (a) alternate short selling measure (i.e. utilization ratio), (b) alternate exogeneous events involving Trump election 2016 and US withdrawal from the Paris Accord 2017, (c) the staggered DiD regressions involving sequential implementation of US state climate adaptation plans. (d) alternate climate risk proxies i.e., CDP scores and textual physical risk measures (source: Li et. al., 2024, RFS), (e) alternate CDS maturities, (f) inclusion of lagged CDS spreads and equity short selling, and (g) placebo test. Further tests show that the relationship for bond short selling and subsequent CDS spreads mainly holds for long term maturity and non-investment grade bonds. Our results imply strong evidence of attention hypothesis where the sensitivity of short selling to subsequent CDS spreads is evident post Paris agreement, and possible market underreaction hypotheses given the strength of results for non4 investment grade issues. Overall, our findings inform that regulatory and physical climate risks can significantly influence the relationship between bond short selling and subsequent CDS spreads when attention to climate risk increases.

The second essay examines how bond short selling propagates credit risk across technologically linked firms, revealing spillover effects beyond traditional industry boundaries. Leveraging a novel measure of technological proximity, we show that short selling activity in technologically related firms provides significant predictive power for a firm’s credit default swap (CDS) spreads. Furthermore, we find information effects of bond short selling are driven by cross-industry technology linkages rather than shared sectoral exposures. The paper extends the literature by showing that bond short selling at the peer level offers additional predictive value for credit risk. The findings emphasize systemic risks emerging from technology-driven interconnectedness and suggest that regulators should monitor peer short selling as an early warning signal for sector-wide stress, particularly during technological disruptions.

The third essay examines whether climate risk propagates through technological linkages across firms and whether these spillovers are priced in bank loans. Using patent based measures of technological proximity, I construct a technology weighted climate exposure that captures climate risk originating from technologically connected peers. Panel regressions show that higher peer climate risk predicts significantly higher future loan spreads for focal firms, particularly for aggregate and regulatory climate risk. In contrast, greater opportunity related climate exposure among technologically linked peers is associated with lower loan spreads, suggesting that such signals convey adaptability and stronger competitive positioning within the technology network. Overall, the findings highlight technology networks as an important channel through which climate 5 risk is incorporated into corporate lending, with implications for bank risk management and climate related policy.

Convocation Year

2026

Convocation Season

Spring

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