Green Bonds vs Regular Bonds: Debt Level and Corporate Performance

Abstract

This paper compares the effectiveness of traditional and green bonds for corporate performance among globalcompanies which issue these types of bonds. Our research represents a first attempt to provide an original empiricalcontribution with a specific focus on the influence of green debt levels on corporate performance. We develop aframework for the analysis of the influence of the debt level on corporate performance, and also compare the influence ofvarious types of bonds issuance on several indicators of corporate performance.Our data refer to 118 companies from various industries and countries, including 17 companies issuing green bonds inthe period from 2013 to 2017. We study the impact of debt levels on some standard corporate performance indicators,such as ROA, ROE, Revenue/Assets, EBITDA/Assets and EBIT/Assets.Our results show that bond issuance has a positive effect on corporate performance. In particular, the relationshipbetween debt levels and corporate performance is described in a non-linear way (an inverse U-shape), i.e., as debt levelincreases, the firm’s corporate performance grows, but only up to a certain point where the largest positive effect isachieved. Moreover, we find that the issuance of green bonds has a larger positive impact on corporate efficiency thantraditional bonds and the growth in the share of green financing in the total company’s debt has a positive impact oncorporate performance.This study opens up avenues for further research in the field, and combining our approach to evaluating the effect ofgreen bonds on corporate performance with an examination of companies arranged according to their life cycle stagewould be intriguing. However, at the present stage of development of the green bonds market it is impossible to studytheir influence on corporate performance as the research selection is rather small, and this market has emerged ratherrecently.

Research on the impact of green bond issuance on the stock price of listed companies

“…Because of the large demand for green projects funds and the inability of green credit to meet, the issuance of green bonds, as a new way of green financing, is being widely used (MacAskill et al , 2020). Based on the evolutionary perspective of green bond issuance, in 2007, Europe issued the first “Climate Awareness Bond” specifically to meet the financing needs of green projects (Jakubik and Uguz, 2020); in 2008, the World Bank and the Bank of Sweden issued the first bond named “Green Bond.” Subsequently, the issuance of green bonds began to receive the attention and recognition of various stakeholders and became prevalent all over the world (Agliardi and Chechulin, 2020). Green bonds are fixed-income bonds issued by financing entities dedicated to the development of green projects (Gianfrate and Peri, 2019).…”