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Why do firms issue green bonds?

Author

Listed:
  • 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)

  • Shema Mitali

    (SKEMA Business School - SKEMA Business School, UniCA - Université Côte d'Azur)

  • Julien Xavier Daubanes

    (DTU - Danmarks Tekniske Universitet = Technical University of Denmark)

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.

Suggested Citation

  • Jean-Charles Rochet & Shema Mitali & Julien Xavier Daubanes, 2026. "Why do firms issue green bonds?," Post-Print hal-05476791, HAL.
    • Handle: RePEc:hal:journl:hal-05476791
    DOI: 10.1177/01956574251366200
    as

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