Green bond vs conventional bond: Outline the rationale behind issuance choices in China

Abstract

Increasingly serious ecological problems have generated considerable focus on environmental-friendly green bonds. Although it has been experiencing rapid development, the rationales behind its issuance remained largely unexplored. This paper makes an initial discussion based on China. We analyze the roles of potential factors that might affect issuers to choose between green or conventional bonds, as well as identify the confrontational combinations of the statistically significant determinants. A sample of green and matching conventional corporate bond issuance records since 2016 is studied through the binary choice regressions (Probit and Logit) and fuzzy set qualitative comparative analysis (fs-QCA). The results demonstrate different motives and premises drive firms to choose green or conventional bonds when using debt financing. This choice can be eventually attributed to the financing demand and the preference of issuers. The factors related to bonds' specific characteristics, issuers' financial features, and external ambience conditions might play significant roles in this decision process. Additionally, we summarized three causal paths affecting the green bond issuance choice. Overall, this paper provides a knowledge basis for targeted encouraging green bond issuance, some corresponding implications are also concluded.