Green Bonds vs Regular Bonds: Debt Level and Corporate Performance

Abstract

This paper compares the effectiveness of traditional and green bonds for corporate performance among global
companies which issue 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 for the analysis of the influence of the debt level on corporate performance, and also compare the influence of
various types of bonds issuance on several indicators of corporate performance.
Our data refer to 118 companies from various industries and countries, including 17 companies issuing green bonds in
the period from 2013 to 2017. We study the impact of debt levels on some 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 is described in a non-linear way (an inverse U-shape), i.e., as debt level
increases, the firm’s corporate performance grows, but only up to a certain point where the largest positive effect is
achieved. Moreover, we find that the issuance of green bonds has a larger positive impact on corporate efficiency than
traditional bonds and the growth in the share of green financing in the total company’s debt has a positive impact on
corporate performance.
This study opens up avenues for further research in the field, and combining our approach to evaluating the effect of
green bonds on corporate performance with an examination of companies arranged according to their life cycle stage
would be intriguing. However, at the present stage of development of the green bonds market it is impossible to study
their influence on corporate performance as the research selection is rather small, and this market has emerged rather
recently.