Yu HAN

Jury composition:

Abstract

This thesis focuses on understanding why companies issue green bonds. It comprises three distinct studies designed to answer this question. The first study examines the short-term effects of green bond issuance by analyzing the stock market's reaction to announcements of such issuances. The second study explores the long-term effects of green bond issuance on corporate performance. The third study identifies the factors that motivate companies to issue green bonds. The first study examines how the stock market reacts to green bond issuance announcements. The overall market reaction is negative and significant, but this reaction improves over the sampling period. It is noteworthy that the market reacts more negatively to green bond issuances than to conventional bond issuances. Among the green bonds issued, those with poor environmental performance are more likely to elicit a negative market reaction. Furthermore, green bonds issued more frequently generally receive a more positive market response than those issued for the first time, suggesting economies of scale in issuance costs and/or greater reliability regarding the bond's environmental impact. Finally, the study observes that companies with strong environmental performance experience improved share liquidity. The second study explores the long-term effects of green bond issuance on both environmental and financial performance. Using a sample of 145 first-time green bond issuers and 2,225 non-issuers across ten countries/regions from 2014 to 2019, the research employs a Propensity Score Matching-Difference-in-Difference analysis to assess this impact by comparing post-issuance changes between issuers and a matched control group. The results reveal a significant improvement in financial performance two years after the issuance of green bonds, but no significant change in environmental performance. Performance changes vary across sectors and countries, with only issuers in the industrial and energy sectors truly benefiting from green bond issuance. Furthermore, there is a lag of approximately two years in the improvement of corporate performance. Overall, the impact of green bond issuance on financial and environmental performance varies across regions and sectors. The third study identifies the determinants of green bond issuance. Using a sample of 8,555 conventional bonds and 354 green bonds issued between 2016 and 2021 in five countries, the research employs mixed-effects logistic regression to test the impact of various variables on the decision to issue green bonds. The study reveals that bond size, maturity, profitability, and debt level significantly influence companies' choices between green and conventional bonds. Specifically, green bond issuers prefer large, short-term issues. Profitable, low-debt companies are more likely to issue green bonds. Interestingly, the cost of issuing green bonds does not appear to be a major concern, and the decision to issue green bonds is not closely linked to ESG (Environmental, Social, and Governance) performance. These findings suggest that financial considerations are not the primary driver behind green bond issuance.