Research Interest

Fixed-Income Markets with an emphasis on Sustainable Finance, Corporate Finance, and Central Banking

Job Market Paper

Green Bonds: Commitment to Sustainability under Asymmetric Information

This paper studies the potential of green bonds in addressing information asymmetries related to firms' exposure to climate risks by signalling a commitment to sustainable investing. Using event study and triple-difference methodology on extant debt and equity securities around green bond and comparable conventional bond announcements, it introduces a new identification strategy to assess the impact of green bonds on issuers' cost of capital. The results show that green bonds are associated with a lower cost of capital (debt and equity), especially for longer-maturity bonds, with the effect driven by non-financial issuers and those with lower credit ratings. Financial issuers show no significant impact, likely due to credibility concerns. Green bond issuers also become less sensitive to climate concerns post-announcement, supporting the signalling hypothesis. A green bond signalling model is introduced, illustrating how issuers give up their flexibility and signal a "green commitment," thereby mitigating climate risk information asymmetries, resulting in beneficial effects.

Main Advisor: Kjell Nyborg
Website: Job Market Candidates