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Economic Change and Restructuring
Published in: Economic Change and Restructuring 5/2023

14-06-2022

The price of frequent issuance: the value of information in the green bond market

Authors: Suk Hyun, Donghyun Park, Shu Tian

Published in: Economic Change and Restructuring | Issue 5/2023

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Abstract

Information asymmetry related to environmental impacts and greenwashing-related reputational risks poses a key challenge for green bond market development. Information enhancers-such as green labels, certifications, and external reviewers-help reduce information asymmetry, thereby lowering bond yields. This study examines whether frequent green bond issuance, as a new information channel, is priced in as frequent issuers offer greater information transparency and signal stronger environmental commitment. Using global green bond issuance from 2014 to 2019, we found that on average, infrequent green bond issuers pay 114–177 basis points more than frequent green bond issuers. Results from the Blinder-Oaxaca decomposition further show that 8 basis points of this yield difference cannot be explained by common pricing factors, partly reflecting the value of information. These findings show that green bond issuers can cost-efficiently convey information via frequent issuance. Policy makers should encourage frequent green bond issuance to lower information asymmetry, thereby boosting green investment and fostering green recovery.
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Appendix
Available only for authorised users
Footnotes
1
The numbers in parentheses represent the number of observations for MTN issuers among both infrequent and frequent issuers.
 
2
When estimating the twofold decomposition with two groups coefficients, the paper uses their equally weighted average (Reimers 1983), a weighted average that reflects the number of observations in two groups (Cotton 1988), as well as pooled coefficients both including and excluding the group indicator variable (Neumark 1988, Jann 2008). In this study, the reference coefficients come from pooled regressions without the group indicator variable included as a covariate.
 
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Metadata
Title
The price of frequent issuance: the value of information in the green bond market
Authors
Suk Hyun
Donghyun Park
Shu Tian
Publication date
14-06-2022
Publisher
Springer US
Published in
Economic Change and Restructuring / Issue 5/2023
Print ISSN: 1573-9414
Electronic ISSN: 1574-0277
DOI
https://doi.org/10.1007/s10644-022-09417-0

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