| dc.description.abstract | We study stock market reactions to firms’ announcements of first-time green bond issuances
in two major markets, the US and Japan. Specifically, we attempt to answer two research
questions: 1) whether green bond announcements provide stock-price relevant
information and 2) whether stock price reactions are associated with the credibility of firms’
commitment to green investments.
Our data set consists of 36 announcements from US firms and 31 announcements from
Japanese firms from January 2013 to September 2021. We apply event study methodology and
find evidence of green bond announcements providing stock-price relevant information in the
US. Specifically, we find evidence of negative stock market reactions. By dividing the bonds
into subgroups based on the credibility of issuing firms’ commitments to green investments,
we find that the negative reaction is driven by groups of bonds with relatively low credibility.
For Japan, we find no such evidence.
We also apply OLS regression analysis with assumed measures of credibility as regressors. For
the US market, we find a positive correlation between firms’ environmental performance and
stock price reaction following announcement. For the Japanese market, we find no correlation
between measures of credibility and stock price reaction. | en_US |
