Abstract
The aim of this paper is to investigate the investors’ reaction to environmental actions taken by companies such as the issues of “green bond”. We conduct an event study around the announcement of green bond issuances for all publicly traded companies in the World in the period 2013-2019 (the largest period in literature on this field). Using CARs, we investigate the stock price behavior to green bond issues for 414 listed companies and we demonstrated significant stock price increases around the announcement date of first-time green bond issues. For second issues, the positive stock price reaction to eco-friendly initiatives decreases while it completely disappears for the subsequent issues. From the management perspective, green bond issue seems an eco-friendly action with decreasing marginal benefits, because after the first issue, the market is already aware about the firm’s commitment to green projects.
Highlights
In the last decades, global warming and environmental protection have become an increasingly issue all over the world, pushing governments to find and promote eco-friendly solutions
The objective of this paper is to investigate the stock market reaction to the green bond issues to understand whether these issues create value for shareholders
From an economic point of view, environmental sustainability represents a driver either to exploit new investment opportunities either to mitigate economic and reputational risk and it can be a key aspect in portfolio investment decisions
Summary
Global warming and environmental protection have become an increasingly issue all over the world, pushing governments to find and promote eco-friendly solutions. In 2018, green bonds’ market has grown of 7.5% regarding the previous year reaching $167.3 billion This slow growth reflects decreased issuance in some bond markets, from US issuers. The green bond market remains relatively resilient compared to the broader fixed-income market that declined by 3-4% in recent years This resilience is mainly due to the policy regulation and the rising of awareness of entities around climate change that push them to diversify their investment towards "green projects". We would find managerial implications related to the corporate strategy in implementing environmental projects or R&D projects to improve company’s environmental performances To examine this phenomenon, we hypnotize that stock market prices react positively to the announcement of green bond issuances. The first section is a literature review on Environmental CSR and stakeholder reaction with focus on green bonds history and green bonds characteristic vs conventional ones; the second section explains the data and research methodology; the third section analyzes the results and presents some robustness tests of our models; the final section concludes with suggestions for future research
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