Signaling with Green Bonds: The Role of Green Bond Exchanges in Europe
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- Master Thesis 
A key challenge in further developing the green bond market is establishing the “green credibility” of such bonds. While a number of studies have investigated the effectiveness of third-party certification as a credibility signal, little scholarly attention has been dedicated to green bond exchanges. Such exchanges bear great signaling potential as they combine strict listing requirements for issuers with heightened visibility for green bonds. In an empirical analysis based on a sample of 592 green bonds issued by public European firms between 2013 and 2021, we find that investors on average do not respond positively to the announcement of green bond issuance, but do so if the green bond is listed on a dedicated green exchange. Moreover, we show that the stock market reaction to green- exchange-listed bonds is greater in countries with high levels of asymmetric information. In the second part of our analysis, our results indicate that firms do not exhibit improved environmental or financial performance after issuing a green bond, regardless of the presence of green exchange listing or certification. Lastly, we do not find a significant correlation between the stock market reaction to green bond announcements and issuers’ subsequent environmental improvements. Overall, our findings are inconsistent with the signaling argument. While investors perceive green-exchange-listed bonds as an effective signal of firms’ commitment to green practices, issuers of such bonds fail to deliver tangible environmental improvements post-issuance.