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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
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    Cited by:

    1. is not listed on IDEAS
    2. Mireille Chiroleu-Assouline & Mouez Fodha, 2023. "Debt, tax and environmental policy [Dette, taxe et politique environnementale]," Post-Print halshs-04181981, HAL.
    3. John Caramichael & Andreas Rapp, 2022. "The Green Corporate Bond Issuance Premium," International Finance Discussion Papers 1346, Board of Governors of the Federal Reserve System (U.S.).
    4. Bongaerts, Dion & Schoenmaker, Dirk, 2024. "Liquidity and clientele effects in green debt markets," Journal of Corporate Finance, Elsevier, vol. 86(C).
    5. Caramichael, John & Rapp, Andreas C., 2024. "The green corporate bond issuance premium," Journal of Banking & Finance, Elsevier, vol. 162(C).
    6. Mireille Chiroleu-Assouline & Mouez Fodha, 2023. "Dette, taxe et politique environnementale," Revue française d'économie, Presses de Sciences-Po, vol. 0(1), pages 55-106.
    7. ElBannan, Mona A. & Löffler, Gunter, 2024. "How effectively do green bonds help the environment?," Journal of Banking & Finance, Elsevier, vol. 158(C).
    8. Becker, Annette & Fatica, Serena & Rancan, Michela, 2025. "Not only green: Sustainability and debt capital markets," Journal of International Money and Finance, Elsevier, vol. 154(C).
    9. Naeem, Muhammad Abubakr & Ashraf, Sania & Karim, Sitara & Moussa, Faten, 2024. "Green finance under stress: Unraveling the spillover effects of tail risk," International Review of Economics & Finance, Elsevier, vol. 93(PA), pages 225-236.
    10. Rébecca Cardot & Carole Bernard & Jamil Jaballah, 2026. "Green bonds & certification: is getting certified always optimal?," Annals of Operations Research, Springer, vol. 356(1), pages 601-628, January.

    More about this item

    Keywords

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    JEL classification:

    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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