Working Paper Series in Economics and Institutions of Innovation,
Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies

Abstract: This study explores the effect of frequent green bond issuance on a firm’s financing costs. Using a sample of listed Swedish real estate companies issuing in total 1,074 bonds over the period from 2011 to 2021, difference-in-difference analyses and instrumental variable estimations are applied to identify the causal impact of frequent green vis-à-vis frequent non-green bond issuing on a firm’s cost of capital and credit rating. The paper argues that repetitive issuance lowers a firm’s cost of capital, while the effects of first or one-time green bond issuance are the opposite. In line with the reputation capital hypothesis, issuing green bonds even lowers the firm’s cost of equity capital, while issuing non-green bonds does not affect the cost of equity.

Keywords: bond issuance; green debt; reputation capital; sustainability; ESG

JEL-codes: G32; R30; R32

Language: English

21 pages, November 21, 2023

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