The Benefits of Issuing Green Bonds: Evidence From China Green Bonds Market

Abstract

In 2019, China has become the largest issuance source in the global green bonds market. This paper studies the benefits of green bonds issuance to issuers and investors in China green bond market, including announcement effect, green premium, and the changes of firm financial performance and institutional ownership. First, green bonds issuance has a negative but insignificant announcement effect on the company’s stock return. Then we find that green premium is nearly zero demonstrating that investors are not willing to sacrifice profits for environmentally friendly projects. Thirdly, after green bonds issuance, financial performance of issuers does not have a significant improvement, but institutional ownership ratio has increased notably. In short, there is no significant difference between green bonds and conventional bonds in terms of issuance. Green bonds issuance may not have a direct pecuniary benefit to firms and investors but can be added into portfolios of institutional investors and improve their ESG score.

Keywords: Green bonds, Green premium, Announcement effect, Financial performance, Ownership structure

JEL Classification: G12, G14, G30