Investors’ Value Perception of Green and Brown Bond Issuances

Abstract: The purpose of this study is to investigate if the equity markets react more positively to the issuance announcement of a green bond compared to the issuance announcement of a brown bond and if the introduction of the EU taxonomy has had an effect on the announcement effects. The study contributes to the existing literature by using an updated sample of 511 bonds from 61 issuers stemming from countries within the EU and testing if investor behavior regarding the announcement effect has changed after introducing the EU taxonomy. The study uses an event-study methodology and regression analysis for robustness. It contributes to the existing literature as the results do not show any positive significant announcement effect on the stock price regarding the issuance of a green bond, but instead a significant negative effect after the announcement of brown bond issuance. Furthermore, the results suggest investors' value perception in regards to the announcement of green and brown bonds has changed after the announcement of the EU taxonomy.