Liquidity Risk and Yield Spreads of Green Bonds

Wulandari, Febi; Schaefer, Dorothea; Stephan, Andreas; Sun, Chen

doi:10.2139/ssrn.3161323

Cited by 20 publications

(10 citation statements)

References 33 publications

(33 reference statements)

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“…To analyze further differences in characteristics between green and brown bonds from private versus institutional issuers, we re-estimated the liquidity and variance specifications in Equations (2) and (3) for the two different groups. Results on liquidity differences are shown in Table 9.…”

Section: The Institutional-private Issuer Breakdownmentioning

confidence: 99%

“…Zerbib [1] showed that there is a mostly negative green bond premium, which is especially high in some market segments, claiming that the rating and the amount issued are the main drivers of the premium. Wulandari et al [2] analyzed how liquidity risk affects the yield spread between a couple of matched green and brown bonds, arguing that liquidity risk is negligible for green bonds. Reboredo [3] found that green bond returns are strictly correlated with corporate and treasury bond returns, whereas they weakly co-move with stocks and energy commodities.…”

Section: Introductionmentioning

confidence: 99%

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The Green Bonds Premium Puzzle: The Role of Issuer Characteristics and Third-Party Verification

2019

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Section: The Institutional-private Issuer Breakdownmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

The Green Bonds Premium Puzzle: The Role of Issuer Characteristics and Third-Party Verification

2019

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“…Their results, through the period 2014-2017, reflect that green and climate-aligned muni indices present compound annual growth rates of 4.5%, compared with 3% for the S&P Investment Grade Municipal index, showing the outperformance of such green and climate-aligned financing tools. Wulandari et al (2018) focus their work on the Green Bond issuer side by assessing the relation between liquidity risk and yield spread evolution. The findings show that both the "LOT" liquidity and the bid-ask indicators are positively related to the yield spread.…”

Section: Green Bond Marketmentioning

confidence: 99%

Corporate Green Bond Issuances: An International Evidence

Lebelle

Jarjir

Sassi

2020

JRFM

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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.

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“…Understanding the supply‐side dynamics is equally, if not more, important than demand‐side in shaping green bonds market for a greener economy (Caldecott, ; Mathews & Kidney, ). However, although there are some studies on green bond market drivers, particularly relating to demand (e.g., OECD, ; Wood & Grace, ; Wulandari, Schäfer, Andreas, & Sun, ; Zerbib, ), studies concerning supply‐side remain limited. In particular, to the best of our knowledge, no empirical study yet provides an understanding of the effects of green bonds supply on the market.…”

Section: Introductionmentioning

confidence: 99%

Sustainable financing practices through green bonds: What affects the funding size?

Barua

Chiesa

2019

Bus Strat Env

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Financing through the supply-driven green bonds market has significantly surged in recent years. In this paper, we examine the factors influencing the size of financing though green bond supply, using cross-section OLS regressions on a global dataset for 8 years (2010-2017) sourced from Bloomberg. We consider a set of tridimensional factors: bond characteristics, issuer characteristics, and market characteristics and examine their effects on issue size. Alongside whole sample estimation, we produce year-wise estimations to realize the evolution and persistence of the effects over time. We then produce estimates across rating grades of the bonds. Finally, we carry Blinder-Oaxaca decomposition to see if average issue size has significantly changed over time and whether the factors considered can explain the difference.We find a large number of factors affecting issue size asymmetrically; however, many of the effects do not persist over time and are heterogeneous across rating grades. In contrast to the aggregate market trend, we find no evidence of increases in average issue size in the recent year. Furthermore, the average financing size is found significantly lower for high-grade bonds. The paper provides a basis for encouraging green bond supply, particularly considering the rating of the bonds and the issuers.

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Liquidity Risk and Yield Spreads of Green Bonds

Cited by 20 publications

References 33 publications

The Green Bonds Premium Puzzle: The Role of Issuer Characteristics and Third-Party Verification

The Green Bonds Premium Puzzle: The Role of Issuer Characteristics and Third-Party Verification

Corporate Green Bond Issuances: An International Evidence

Sustainable financing practices through green bonds: What affects the funding size?

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