Green Bonds: Reputational Bonding via Media Coverage

Building on prior literature showing that green bond issuance signals a firm’s environmental commitment, this paper provides empirical evidence on a mechanism that gives credibility to this signal: reputational bonding through increased media coverage. Compared with matched firms, media coverage of a firm’s environmental performance increases significantly after issuing green bonds. This increase persists over time and extends to aspects of environmental performance that go beyond the contractual obligations of the green bond. Although this result is more pronounced for positive news, the increase in negative news is significantly larger for green bond issuers with environmental controversies after green bond issuance. Cross-sectional analyses show that this media coverage increase is concentrated among green bond issuers that are larger, listed on green bond exchanges, and in countries with weaker institutional oversight of environmental issues. To shed light on the effectiveness of this reputational bonding mechanism, I find that higher media attention following green bond issuance is associated with higher environmental performance. This paper was accepted by Ranjani Krishnan, accounting. Funding: S. Lu gratefully acknowledges financial support from Harvard Business School, the University of Chicago Booth School of Business, and the Bradley Fellowship awarded by the Stigler Center for the Study of the Economy and the State. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2024.05701 .