| dc.description.abstract | 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. | en_US |
