Why do firms issue green bonds?

Shema Mitali, Julien Xavier Daubanes and Jean-Charles Rochet
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Shema Mitali: Unknown
Julien Xavier Daubanes: Unknown
Jean-Charles Rochet: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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Abstract: Corporate green bond announcements generate positive abnormal stock returns. We suggest this might be because managers use green bonds to signal the profitability of the climate-friendly projects they finance. First, we build a signaling model of green bond issuance. It predicts that firms' incentives to decarbonize are amplified by the interest of their managers in their stock price. Second, we provide supporting empirical evidence, using cross-country variations in effective carbon prices, and cross-industry differences in the stock-price sensitivity of managers' compensation. Our results suggest that green bonds are not substitutes for but rather complements to carbon pricing.

Keywords: green bonds; green finance; climate policy; carbon pricing; managerial incentives (search for similar items in EconPapers)
Date: 2025-09
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Published in Energy Journal, 2025, pp.1-22. ⟨10.1177/01956574251366200⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05476791

DOI: 10.1177/01956574251366200

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