This chapter examines the relationship between corporate green bond issuance and equity market performance, investigating whether the announcement of green bond issuances generates positive stock market reactions. After reviewing the evolution of the green bond market, its regulatory framework, and the existing literature on green bond pricing and shareholder value, the study provides new empirical evidence based on European corporate issuers. Using a sample of 90 corporate green bonds issued by 52 European companies between 2013 and 2019, together with a benchmark sample of 149 conventional bonds issued by the same firms, the analysis combines an event study methodology with cross-sectional regression models. Abnormal stock returns are estimated around bond announcement dates to assess investors' reactions, while regression analysis examines whether the green label significantly explains cumulative abnormal returns after controlling for bond- and firm-specific characteristics. The results show that green bond announcements are associated with positive and statistically significant cumulative abnormal returns, particularly in the event windows surrounding the announcement date, whereas conventional bond issuances do not produce comparable market effects. Furthermore, the regression analysis confirms that the green label has a positive and significant impact on shareholder value, suggesting that investors reward firms issuing environmentally sustainable debt instruments. Additional findings indicate that firm growth opportunities, measured by Tobin's Q, are positively associated with market reactions, while bond size and maturity display negative effects in some specifications. Overall, the evidence supports the view that corporate green bond issuance creates shareholder value by signaling a credible commitment to environmental sustainability, enhancing corporate reputation, and attracting sustainability-oriented investors. The study contributes to the growing literature on sustainable finance by demonstrating that green bonds not only support environmental objectives but also generate favorable financial market outcomes for issuing firms.
Camacci, R., Corporate Green Bond: Issuance and Equity Market Reaction, in Bellavite Pellegrini, C. P. L. C. M. (ed.), Climate Change Adaptation, Governance and New Issues of Value: Measuring the Impact of ESG Scores on CoE and Firm Performance, Palgrave Macmillan UK, London 2022: 9288 227- 249. 10.1007/978-3-030-90115-8_10 [https://hdl.handle.net/10807/341500]
Corporate Green Bond: Issuance and Equity Market Reaction
Camacci, Rachele
Primo
2022
Abstract
This chapter examines the relationship between corporate green bond issuance and equity market performance, investigating whether the announcement of green bond issuances generates positive stock market reactions. After reviewing the evolution of the green bond market, its regulatory framework, and the existing literature on green bond pricing and shareholder value, the study provides new empirical evidence based on European corporate issuers. Using a sample of 90 corporate green bonds issued by 52 European companies between 2013 and 2019, together with a benchmark sample of 149 conventional bonds issued by the same firms, the analysis combines an event study methodology with cross-sectional regression models. Abnormal stock returns are estimated around bond announcement dates to assess investors' reactions, while regression analysis examines whether the green label significantly explains cumulative abnormal returns after controlling for bond- and firm-specific characteristics. The results show that green bond announcements are associated with positive and statistically significant cumulative abnormal returns, particularly in the event windows surrounding the announcement date, whereas conventional bond issuances do not produce comparable market effects. Furthermore, the regression analysis confirms that the green label has a positive and significant impact on shareholder value, suggesting that investors reward firms issuing environmentally sustainable debt instruments. Additional findings indicate that firm growth opportunities, measured by Tobin's Q, are positively associated with market reactions, while bond size and maturity display negative effects in some specifications. Overall, the evidence supports the view that corporate green bond issuance creates shareholder value by signaling a credible commitment to environmental sustainability, enhancing corporate reputation, and attracting sustainability-oriented investors. The study contributes to the growing literature on sustainable finance by demonstrating that green bonds not only support environmental objectives but also generate favorable financial market outcomes for issuing firms.
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