Do Green Bond Announcements Affect Share Prices of the Issuer Firm: Evidence from US MarketTools Gulleroglu, Pelin (2020) Do Green Bond Announcements Affect Share Prices of the Issuer Firm: Evidence from US Market. [Dissertation (University of Nottingham only)]
AbstractThe purpose of the research is to identify is there a relationship between green bond announcement of a firm and their share price in US market. Based on obtained abnormal share returns around green bond announcement period, an event study approached is applied. Hypotheses regarding positive cumulative abnormal return (CAAR) and difference of CAAR on non-financial vs financial and first-time vs recurrent issuance are tested. On the days t=-3, 1 and 2, relative to announcement day on t=0, US sample resulted in higher and statistically significant positive average abnormal returns compared to other days. Interestingly, day t=0 holds the greatest negative average abnormal return, that is -0.0033,which is also found to be statistically significant (p-value being 0.0254). It can be inferred that majority of the US investors had already reacted to green bond issuance beforehand which is supported by the greatest positive AAR resulted on day t=-3, which is 0.0053. Analysis hints a semi-strong form of market efficinecy since private information unavailable to market before public announcement seems to be used by the US investors to gain an advantage in trading. CAAR of the US sample is approximately 0.011 for 11-days event period which is found statistically significant (p-value being 0.0405), as well. Thus, the green bond issuance leads to a positive reaction by the US market since shareholders appreciate the issuer firms. It can be concluded that green bond issuance implies increased firm value in the short-run. On the other hand, the mean difference between financials vs non-financials and recurrent vs first-time issuance are not found statistically significant. The current literature implies significant mean differences as non-financials and first-time issuers being greater than financial and recurrent issuers, respectively. Limitations experienced during the course of the research are discussed which are believed to affected those sub-grouped hypothesis tests.
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