Do Shareholders Benefit from Green Bonds?

55 Pages Posted: 25 Oct 2018 Last revised: 24 Nov 2018

See all articles by Dragon Yongjun Tang

Dragon Yongjun Tang

The University of Hong Kong - Faculty of Business and Economics

Yupu Zhang

The University of Hong Kong - Faculty of Business and Economics

Date Written: November 22, 2018

Abstract

The green bond market has been growing rapidly worldwide since its debut in 2007. We present the first empirical study on the announcement returns and real effects of green bond issuance by firms in 28 countries during 2007-2017. After compiling a comprehensive international green bond dataset, we document that stock prices positively respond to green bond issuance. However, we do not find a significant premium for green bonds, suggesting that the positive stock returns are not driven by the lower cost of debt. Nevertheless, we show that institutional ownership, especially from domestic institutions, increases after the firm issues green bonds. Moreover, stock liquidity significantly improves upon the issuance of green bonds. Overall, our findings suggest that the firm’s issuance of green bonds is beneficial to its existing shareholders.

Keywords: Green Bonds, Corporate Social Responsibility, Environmental, Social, and Governance (ESG), Institutional Ownership, Stock Liquidity, Investor Attention

JEL Classification: G14, G32, G38, M14

Suggested Citation

Tang, Dragon Yongjun and Zhang, Yupu, Do Shareholders Benefit from Green Bonds? (November 22, 2018). Available at SSRN: https://ssrn.com/abstract=3259555 or http://dx.doi.org/10.2139/ssrn.3259555

Dragon Yongjun Tang

The University of Hong Kong - Faculty of Business and Economics ( email )

KKL 1004
Pokfulam Road
Pokfulam
Hong Kong
(852)22194321 (Phone)

Yupu Zhang (Contact Author)

The University of Hong Kong - Faculty of Business and Economics ( email )

Hong Kong

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