Julien Xavier Daubanes, Université de Genève

"Why do firms issue green bonds?"

Abstract

We hold that green finance certifcation allows managers to signal firms' effciency at addressing the energy transition. In our model of green bond issuance, signaling amplifies incentives to decarbonize. The model predicts that firms' managers are more inclined to issue green bonds when they are more interested in stock prices. We test this prediction by exploiting cross-industry differences in the stock-price sensitivity of managers' compensation and cross-country variations in effective carbon prices. The effect of managers' incentives on green bond issuance increases with carbon penalties. These results suggest that green bonds are complements to, rather than substitutes for, carbon pricing.

(Joint with Shema Frédéric Mitali and Jean-Charles Rochet

Contact person: Stefan Voigt