The reputation effect of green bond issuance and its impact on the cost of capital

Aleksandar Petreski (), Dorothea Schäfer and Andreas Stephan
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Aleksandar Petreski: Jönköping International Business School

No 493, Working Paper Series in Economics and Institutions of Innovation from Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies

Abstract: This study explores the effect of frequent green bond issuance on a firm’s financing costs. Using a sample of listed Swedish real estate companies issuing in total 1,074 bonds over the period from 2011 to 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 repetitive issuance lowers a firm’s cost of capital, while the effects of first or one-time green bond issuance are 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 does not affect the cost of equity.

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: 21 pages
Date: 2023-11-21
New Economics Papers: this item is included in nep-cfn, nep-env and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:cesisp:0493

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