The Benefit to Shareholders from Corporate Green Bonds in the Asia-Pacific Region

Motivation: The green bond market has been actively growing since it was first issued in 2007, especially in the Asia-Pacific region. However, empirical analysis of green bonds, particularly from the equity investor's point of view, is still rare. This is the first empirical analysis focusing on the green bond in the Asia-Pacific and the behavior of equity investors. Premise: Green bonds are essentially financial instruments issued to fund environmentally friendly projects, hence, it is expected to be positively evaluated by the market. Approach: This study investigates how and to what extent the issuance of green bonds benefits equity investors in Asia-Pacific based on the data from 2013 to 2020 with event study and cross-sectional analysis. Results: This study finds that there is a more positive cumulative average abnormal return (CAAR) of the listed corporate stocks around its green bond issuance announcement. Hence, green bond issuance is positively evaluated by equity investors. Secondly, from the cross-sectional analysis, we find that the market value of the company and the amount of green bonds issued per total debt are positively correlated, while profitability has an adverse relationship with CAAR. However, we find that book-to-market ratio, leverage, and whether or not the company publishes environmental, social, and corporate governance (ESG) reports are statistically insignificant. Conclusion: Green bond benefits equity investors from the abnormal returns of the listed stocks. Consistency: This paper has provided an empirical analysis and contributed to the extent of understanding in the limited yet developing green bond field of study. Keywords: Asia-Pacific, equity investor, green bonds JEL Classification Codes: Q01, G14, G41
INTRODUCTION This study investigates whether the issuance of green bonds benefits equity investors in the Asia-Pacific region. The issuance of green bonds in the Asia-Pacific region is a growing share [...]