Stock market reaction to green bond issuance

This study examines the stock market reaction to the announcement of green bond issuance. The cumulative abnormal returns are positive and significant. This implies that shareholders view this form of financing as value-enhancing and funds from green bonds issuance are used to undertake profitable green projects or as a means of risk mitigation. Regression analysis shows that green bonds with higher coupon rates elicit a negative investor reaction. Also, firm size, Tobin’s Q, and growth are positively related to the CAR, while operating cash flow is negatively related to the CAR. The positive coefficient for firm growth is consistent with the value-enhancing function of funds from green bonds.