The signaling value of green bond issuance: evidence from U.S. stock markets

Abstract

Green bonds have become a prominent instrument for financing corporate environmental commitments, yet evidence on how equity markets value their issuance remains mixed, particularly in the United States. Using a sample of 187 green bond issuance announcements by U.S. listed companies from 2016 to 2024, this study examines the short-term stock market reaction with an event study methodology. Cumulative abnormal returns are estimated using the market model across three event windows [−1, +1], [−5, +5], and [−20, +20] and cross-sectional regressions test whether issuer characteristics shape the reaction. The findings indicate that green bond announcements do not generate a positive market reaction, the cumulative average abnormal returns are negative in all three windows, ranging from −1.26% to −2.50%. A propensity-score-matched comparison against conventional bond announcements confirms that this negative reaction is specific to the green attribute rather than to general debt issuance announcements. In the cross-sectional analysis, the market response is positively associated with the issuer’s pre-announcement ESG performance, with the effect strengthening over longer windows, whereas first-time issuance status shows no significant relationship with abnormal returns. These results suggest that U.S. investors value credible environmental signals from issuers with stronger ESG performance even the overall market reaction to green bond issuance is negative.