Corporate green bonds in the equity and debt capital markets – a comparative study of Sweden, the US and Europe

Abstract: Title: Corporate green bonds in the equity and debt capital markets – a comparative study of Sweden, the US and Europe Seminar Date: June 1st, 2022 Course: BUSN79 Authors: Valentin Eriksson, Ole Heinrichs Advisor: Marco Bianco Keywords: Corporate green bonds, debt capital markets, equity capital markets, country comparison, Sweden, US, Europe, signalling theory, information asymmetry, bond coupons, Price-to-Book, WACC, environmental attitude, investors taste Purpose: This paper aims to explain the differences between green and conventional corporate bond issuers dependent on the country of issuance. In detail, the focus lies on the analysis of the differences within the equity and debt capital markets on the firm level. Methodology: This paper uses quantitative data collection with a deductive research approach. In detail, Difference-in-Differences models, as well as multivariate regression models, are applied as well as propensity score matching. Theoretical Perspective: The applied theories in this paper are the Signalling theory and the information asymmetry theory. Empirical foundation: This paper includes 1731 firms in total, of which 1557 firms are conventional and 174 are green bond issuers. The data is collected from Bloomberg’s equity screening tool and FactSet and covers the years between 2015 and 2021. Conclusion: This paper finds no difference in investor valuation within the equity capital markets for the respective countries, whilst finding on average lower bond prices for corporate green bond issuers in Sweden, whilst this correlation does not apply to the US or selected EU debt capital markets. Further, we suggest that this lower coupon of green bonds in Sweden is reflected by an on average lower WACC of green bond issuers in Sweden, whilst this relation cannot be found for the US or selected EU capital markets. This finding can be explained through the signalling and the information asymmetry theory.