Physical Climate Risk–Attention Gaps and Corporate Bond Credit Spreads

As climate change intensifies, extreme weather increasingly disrupts corporate operations and debt-servicing capacity, making physical climate risk more important in credit assessment. Yet firms’ exposure may not align with the managerial attention disclosed in annual reports, and whether bond markets price this mismatch remains unclear. Using Chinese listed firms and their outstanding corporate debt securities from 2012 to 2024, this study integrates daily city-level weather data, annual-report text, and bond trading data. Historical extreme-precipitation exposure measures local physical risk, while MacBERT identifies managerial attention. The difference between the standardized measures defines the physical climate risk–attention gap. The results show that investors assess physical risk and managerial attention jointly. Credit spreads are higher in the upper part of the relative exposure–attention gap distribution, and persistent high-gap states are associated with higher credit spreads. The association is stronger among firms with more volatile cash flows and smaller boards and remains stable across information-timing placebo tests, entropy-balancing analyses, and alternative measurement specifications. These findings explain how the alignment between physical risk and managerial attention is reflected in corporate bond prices and inform climate disclosure, bond-market risk assessment, and climate resilience in the real economy.