Green Bonds’ Reputation Effect and Its Impact on the Financing Costs of the Real Estate Sector

Aleksandar Petreski, Dorothea Schäfer and Andreas Stephan

No 2019, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: This paper explores the effect of a firm’s reputation of being a green bond issuer on its financing costs. Using a sample of 73 listed Swedish real estate companies issuing in total about 1500 bonds over the period from 2011 till 2021, difference-in-difference analyses and instrumental variable estimations are applied to identify the causal impact of frequent green vis-à-vis frequent non-green bond issuing on a firm’s cost of capital and credit rating. The paper argues that it is repetitive issuance which lowers a firm’s cost of capital, while the effects from first or one-time green bond issuance is the opposite. In line with the reputation capital hypothesis, issuing green bonds even lowers the firm’s cost of equity capital, while issuing non-green bonds has no effect on the cost of equity capital.

Keywords: Bond issuance; green debt; reputation capital; sustainability; ESG (search for similar items in EconPapers)
JEL-codes: G32 R30 R32 (search for similar items in EconPapers)
Pages: 25 p.
Date: 2022
New Economics Papers: this item is included in nep-cfn, nep-env and nep-ure
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https://www.diw.de/documents/publikationen/73/diw_01.c.855795.de/dp2019.pdf (application/pdf)

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Working Paper: Green bonds' reputation effect and its impact on the financing costs of the real estate sector (2022)
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