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Green Bonds’ Reputation Effect and Its Impact on the Financing Costs of the Real Estate Sector

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  • Aleksandar Petreski
  • Dorothea Schäfer
  • Andreas Stephan

Abstract

This paper explores the effect of a firm’s reputation of being a green bond issuer on its financing costs. Using a sample of 73 listed Swedish real estate companies issuing in total about 1500 bonds over the period from 2011 till 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 it is repetitive issuance which lowers a firm’s cost of capital, while the effects from first or one-time green bond issuance is 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 has no effect on the cost of equity capital.

Suggested Citation

  • Aleksandar Petreski & Dorothea Schäfer & Andreas Stephan, 2022. "Green Bonds’ Reputation Effect and Its Impact on the Financing Costs of the Real Estate Sector," Discussion Papers of DIW Berlin 2019, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwwpp:dp2019
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    References listed on IDEAS

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    More about this item

    Keywords

    Bond issuance; green debt; reputation capital; sustainability; ESG;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis

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