Abstract

This article provides a comprehensive analysis of the stock market reaction to green bond issuance announcements for a large, international sample of listed companies. Existing empirical studies find mixed results regarding this issue. Using a sample of 595 green bonds issued between 2014 and 2021, we conducted a series of event studies to analyze the changes in issuer returns and liquidity following the announcements. We find that the market reaction is significantly negative, more severe compared to conventional bond issues, but improves over time. Green bonds issued by companies with poor environmental performance or without prior experience in issuing such bonds generate a more negative market reaction. We also find that stock liquidity improves for issuers with good environmental performance. Our findings have significant implications as they suggest the existence of economies of scale in repeated issuances of green bonds and/or increasing reliability in the bond’s greenness.