Green Bonds vs Regular Bonds: Debt Level and Corporate Performance

This paper compares the effectiveness of traditional and green bonds on corporate performance among global companies issuing these types of bonds. Our research represents a first attempt to provide an original empirical contribution with a specific focus on the influence of green debt levels on corporate performance.

We develop a framework to analyze the influence of debt levels on corporate performance and compare the effects of issuing various types of bonds on several indicators of corporate performance.

Our data cover 118 companies from various industries and countries, including 17 companies issuing green bonds during the period from 2013 to 2017. We study the impact of debt levels on standard corporate performance indicators such as ROA, ROE, Revenue/Assets, EBITDA/Assets, and EBIT/Assets.

Our results show that bond issuance has a positive effect on corporate performance. In particular, the relationship between debt levels and corporate performance follows a nonlinear pattern (an inverse U-shape), meaning that as debt levels increase, corporate performance improves up to a certain point where the largest positive effect is reached. Moreover, we find that issuing green bonds has a larger positive impact on corporate efficiency than traditional bonds, and growth in the share of green financing in the company’s total debt positively affects corporate performance.

This study opens avenues for further research in the field. Combining our approach to evaluating the effect of green bonds on corporate performance with an examination of companies categorized by their life cycle stage would be particularly intriguing. However, at the current stage of development of the green bonds market, it is impossible to study their influence on corporate performance in depth due to the small sample size and the recent emergence of this market.