ANALYSING WHETHER ISSUING GREEN BONDS IMPROVES STOCK PRICES AND CORPORATE FINANCIAL EFFICIENCY TO ACHIEVE SUSTAINABLE RETURNS

Abstract

The study examines the effect of issuing green bonds on the stock performance and financial performance of a company with specific reference to the expected level of returns in the financial structure of a company. The study is quantitative in nature where the author uses data on 75 companies that have issued green bonds in various industries. Some of the key variables measured are the stock returns, bond size, Return on Equity (ROE), Return on Assets (ROA), and the value of the stock as measured by the Tobin, Q. Bond size is log-transformed, stock returns measured around the issuance event and performance measured by ROA, ROE, and the variance of T.B.M.N.E. Tables have been used to test the data and the results proved that there is no multicollinearity in the dataset because all of the pairwise correlations were less than 0.5, and On the same note, there is no indication of autocorrelation and the Durbin-Watson statistic is the value of 1.95. The results of the multivariate regression analyses show that the issuance of the green bonds has a positive and statistically significant impact on ROE ( 0.245 = -0.012), as well as the impact of the bond size, stock return, ROA, and market valuation. Further discussion indicates that companies that release higher amounts of green bonds and the companies with higher levels of the Tobin Q are more likely to gain profitability, and high levels of operational performance (defined by ROA) enhance the returns of the shareholders. On the whole, the results indicate that sustainable debt instruments are effective tools in the improvement of corporate value. The increase in ROE, which is estimated to be around 0.25 percentage points, is linked to the issue of every extra unit of green bonds. This data indicates that the environmental financing commitments of firms are positively reacted by investors, as they are expressed in the better equity performance and the financial returns, which supports the importance of using green financing in the corporate capital structure.