Abstract
We uncover a decreasing trend in stock price reactions to corporate green bond offering announcements between January 2013 and June 2021. Further analysis suggests this finding can be jointly attributed to two major environmental shocks, i.e. the US Paris Agreement withdrawal and the global outbreak of COVID-19, and to shifts in green bond issuer characteristics. We furthermore obtain novel evidence on the determinants of stock price reactions around green bond announcements, with cross-sectional results indicating that abnormal stock returns of green bond issuers are negatively influenced by issuers’ proprietary costs, and positively influenced by issuers’ reputational gains from being seen as green, focus on innovation, and debt capacity. We do not find a significant time trend, nor similar announcement return determinants for a placebo dataset of corporate non-green bonds. Our results withstand a range of robustness tests, including a test addressing sample selection bias. Overall, our paper provides a more nuanced, less optimistic view on the shareholder value impact of green bond announcements, compared with the very favorable results of the few prior studies on green bond announcement returns.