The spillover effect of green bond issuance on corporate financial performances: evidence from China

In the context of global warming and environmental protection, the green bond market has been experiencing remarkable growth, necessitating a thorough examination of how companies interpret and react to the “green signals” communicated by these bonds. This study aims to delve into the spillover impact of green bond issuance on the financial performance of peer firms within the same industry. Utilizing panel data from China’s listed companies between 2010 and 2022, we observed that the issuance of green bonds by companies positively influences the financial performance of their peers within the same industry, a phenomenon we term as the “spillover effect”. Furthermore, our analysis suggests that this spillover effect can be attributed to three potential influential mechanisms: market competition, green behaviors, and government subsidies. Specifically, intense market competition enhances the positive spillover effect, while the issuance of green bonds encourages peer companies to adopt environmentally friendly practices and increases their chances of receiving government subsidies. Additionally, our findings indicate that this positive influence is more pronounced in non-polluted sector and among companies with lower financial constraints. These insights provide valuable practical implications for policymakers and managers in promoting green and sustainable development.