Scaling up Investment in Corporate Green Bonds
Summary
This study examines how various bond- and firm-specific characteristics influence
green bond performance, measured by bond yield. Several significant
findings are revealed using cross-sectional data on green bonds issued between
2013 to 2023. By employing a self-compounded dummy variable, it is proven
that green bonds issued by mission-oriented companies can offer lower yields
to investors. Furthermore, the results imply that bonds from repeat issuers
perform better, which is especially true for issuers with frequent issues. These
findings are consistent with the signaling argument commonly used in literature.
The demonstrated lower cost of capital could help scale up the corporate
green bond market by incentivizing companies to issue green bonds on a regular
basis, and to become mission oriented.