The choice between bank and market debt

: evidence from sustainable financing instruments

Abstract

Sustainable finance is a growing topic in the literature due to its fast expanding rhythm, but also for the risks and opportunities it is creating. While it is true that the firms are under pressure to adapt and transform their activities toward a more sustainable and long-term view, there are also opportunities that companies can explore. This dissertation aims to understand the choice between the sustainable debt instruments offered by the banks versus those offered by the market. The analysis integrates three levels of variables: those related with the issuer characteristics, contractual characteristics, and macroeconomic factors. Using a sample of 3,513 sustainable loans and 2,882 sustainable bonds, issued between 2018 and 2023, we find that borrowers facing higher asymmetries of information will tend to choose sustainable loans. Additionally, it has also been proven that there is a positive relationship between the borrower’s country risk, measured by the country rating, and the preference for sustainable banking financing.

Date of Award	28 Oct 2024
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	João Pinto (Supervisor)