The Green Signal: Event Study of Stock Reactions to Green Bond Announcements in India

Abstract

This study explores the short-term reaction of the stock market to announcements of green bond issuance by Indian firms using an event study methodology. Drawing upon signalling theory and supported by a robust dataset of 35 green bond issues from 2015 to 2024, the analysis applies Market Adjusted Returns, Market Model Abnormal Returns, and Risk Adjusted Returns to evaluate abnormal returns over a [-20, +20] trading day window. The findings reveal statistically significant positive abnormal returns immediately following green bond announcements, particularly on days +2, +8 and +12, suggesting investor optimism and perceived commitment to sustainability. However, both pre- and post-event windows exhibit negative returns, which imply either information leakage or short-term correction. The research supports the applicability of green bonds as a strategic investment tool but calls for stable ESG integration and transparent certification mechanisms to maintain long-term investor trust.