Green Debt Financing : Examining Investors’ Reactions to Green Bond Announcements in Europe

Sammanfattning: This paper examines what effects announcements of green bond issuances have on publicly traded firms’ stock prices in Europe. Signalling theory is used in line with suggestions from previous research to investigate potential abnormal returns. Using a dataset of 432 green bond issuances from 165 unique publicly traded firms on European stock exchanges, we conduct an event study around the announcement day [0,1] estimating abnormal returns using the market model. To further investigate determinants of abnormal returns we conduct a multiple linear regression analysis. We document no statistic or economic significant effect in our full sample. Only first-time issuances of green bonds have a significant abnormal return of 0,74% in the period after announcement but show no significant results on the announcement date. Green bonds being a credible signal of environmental commitment thus has inconclusive support in our study and equity investors seem largely indifferent to firm’s green bond announcements.