How do stocks react to the announcement of green bond issuances?

Abstract

My thesis explores the impact of the announcement of green bond issuances on stock prices in Europe. The study is structured around two main research questions. First, I investigate the influence of the announcements of corporate green bond issuances on stock market movements compared to traditional bonds, and second, I identify firm and bond characteristics that affect the market response. The empirical analysis employs an event study, multivariate linear regression and difference-in-differences analysis. Results indicate a positive and significant cumulative abnormal return of 0.179% over a 21-day event window around the green bond announcements, conversely with a negative return of 0.391% for traditional bond announcements over an 11-day event window. I identify a positive significant relationship between the green characteristic of a bond and its cumulative abnormal return over a 21-day event window in a multivariate linear regression. In conducting a difference-in-difference analysis, I find no evidence of a positive relationship between CAR and green characteristic. Overall, my results suggest that investors value firms' commitment to green investments.

Date of Award	26 Jan 2024
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Zoë Venter (Supervisor)