Corporate Green Bond Issuances: An International Evidence

Abstract

Using an international sample of corporate Green bond issuances over the recent period, this paper highlights the potential consequences of the issuance of a Green bond on the issuer’s financial performance. Starting with a first sample of 2079 Green bond issuances of 190 unique issuers from 2009 to 2018, we investigate only corporate green bond issuances. Our final sample contains 475 green bonds issued by 145 unique firms. We find that the market reacts negatively to the announcement of green bond issuances. In particular, results show that the stock market reacts on the day of the green bond announcement date and the day after, and that the cumulative abnormal return is between −0.5% and −0.2%, depending on the asset pricing model (CAPM, the 3-factor Fama and French models, and the 4-factor Carhart models). This effect is mainly noticeable at the first Green Bond issuance and in developed markets. Our results provide evidence that the investors react in the same manner for Green bonds as for conventional or convertible bonds. This evidence suggests that green debt offerings convey unfavorable information about the issuing firms.

Sustainability Bonds. An International Event Study

“…Many studies show that investors have a positive response to news about the issuance of green bonds (Wang et al, 2020;Tang & Zhang, 2020;Roslen et al, 2017;Baulkaran, 2019). However, Lebelle et al (2020) document a negative market reaction when announcing the issuance of green bonds, especially for first-time transactions and for those performed in developed markets. Other recent studies reflect the various interests of institutional investors when acquiring green bonds (Sangiorgi & Schopohl, 2021), while some focus on low-and middle-income economies and highlight several barriers and recommendations for the expansion of the green markets in these countries (Ntsama et al, 2021).…”

An Institutional Pressure and Adaptive Capacity Framework for Green Bonds: Insights from India’s Emerging Green Bond Market

“…Although the literature on both institutional theory and adaptive capacity is still evolving to address the role of institutions in the climate change era, our paper seeks to fill the gap in terms of analyzing new and evolving ethical institutions like the green bond market. So far, the green bond market literature has addressed financial aspects and motivations, such as its positive corporate performance [6], pricing differential [7,8], market liquidity [9,10], comparative financial returns [11,12], investor risk perception [13][14][15], impact and reactions from other types of financial markets like credit [16], treasury, energy [17] and the stock market [18]. However, only a few papers have sought to address the institutional dynamics that play a role in this market from a developing or emerging economy standpoint [10,19], with most focusing on the voluntary governance aspects of this market [20,21].…”

Green bonds: a survey

“…That is, green bond issuance could signal that going green will incur sizeable operational and capital expenditures that investors could interpret as increasing uncertainty regarding future profitability. Lebelle et al (2020) also document that negative stock market reactions are stronger in developed markets, suggesting that investors in such mature markets view green bond issuance more negatively than investors in emerging markets.…”

“…Unlike the abovementioned studies that document positive value for equity holders, some studies provide evidence that the market does not always welcome green bond issuance. Lebelle et al (2020) examine a dataset on international corporate green bonds to analyze issuers' financial performance as measured by their cumulative stock returns. Their main results show that cumulative stock returns around green bond issuance range between À0.5% and À0.2%, depending on which asset-pricing model is used to calculate abnormal stock returns.…”