Can corporate green bond issuance reduce stock price collapse risk?

Purpose The purpose of this paper is to reveal the effect of green bonds in managing stock crash risk, that is, whether green bond affect the stock price crash risk. Design/methodology/approach Given that Chinese companies listed are significantly impacted by transition and stock price crash risks, we take them as the research sample and employ a two-way fixed-effect panel regression model to examine whether green bonds serve a risk management function by exploring the impact of green bond issuance on stock price crash risk. Additionally, we utilize a causal mediation effect test model based on instrumental variables to explore the specific paths of this influence and the function asymmetry in different internal and external conditions. Findings Green bonds serve a risk management function. The issuance of green bonds by enterprises can help reduce the risk of stock price collapse, but this effect is not sustainable. Green bonds mainly affect stock price crash risk through the information asymmetry mechanism and investor concern mechanism. Higher quality corporate environmental information, greater efficiency in external resource allocation and a stronger risk management function. Originality/value First, we reveal the risk management functions concerning both transformation and stock price crashes risk of green bonds. Second, we introduce a causal intermediary mechanism model based on instrumental variables to test the mechanisms of the green bond impact on stock crash risk. Third, according to the differences between internal and external factors, we analyze variation in the risk management function of green bonds under different internal environmental information and external resource allocation.