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.
Keywords
green bonds, green finance, climate policy, carbon pricing, managerial incentives;
JEL codes
- D53: Financial Markets
- H23: Externalities • Redistributive Effects • Environmental Taxes and Subsidies
- G14: Information and Market Efficiency • Event Studies • Insider Trading
- Q54: Climate • Natural Disasters • Global Warming
Reference
Shema Mitali, Julien Daubanes, and Jean-Charles Rochet, “Why do firms issue green bonds?”, The Energy Journal, 2025, pp. 1–22.
See also
Published in
The Energy Journal, 2025, pp. 1–22