The value of being green: Assessing the impact of green bond issuance on stock prices of European listed companies

Green bonds have become increasingly important financial instruments for financing sustainable development, with Europe leading global issuance. Using data on 1122 green bond issuances by European listed companies between 2013 and 2024, we examine the short-term stock market reaction with an event study methodology. We analyse differences across geographical regions (Central and Eastern Europe, Northern Europe, Southern Europe, and Western Europe), company sizes, bond issuance sizes relative to company capitalisation, green bond certifications, and bond maturity. The findings suggest that, in general, the issuance of green bonds does not lead to a significant change in the stock prices of the issuing companies. This overall lack of impact remains consistent across different geographical regions, companies, and issuance sizes. However, certification status emerges as the critical factor. Certified green bonds are associated with a neutral market reaction, whereas self-labelled green bonds trigger significant short-term negative abnormal returns. We interpret certification as a signal that mitigates greenwashing concerns and information asymmetry, thereby neutralising the market reaction relative to self-labelled issues. Furthermore, bonds with medium-term maturities (5–10 years) elicit stronger adverse reactions, while short- and long-term maturities remain largely neutral. These results underscore the importance of certification in green bond issuance and suggest that financial markets react differently based on the certification status of the bonds. With its significant findings, this research contributes to the sustainable finance literature by providing empirical evidence on how green bond issuance impacts company market value, informing investment decisions and policy-making to support the development of green finance.