| dc.description.abstract | To reorient economies towards climate-resilient trajectories compatible
with the goal of the Paris Agreement to limit the global temperature increase
to 1.5 degrees Celsius, vast amounts of capital are needed to be directed
towards environmental-friendly projects. As major economic players at the
forefront of green transitions, corporations may adapt to climate change via
financing innovations, such as issuing green bonds to fund investments which
exclusively provide environmental benefits. Corporate green bond issuances
can be viewed as an environmentally responsible practice, broadly speaking,
corporate social responsibility (CSR) (Tang & Zhang, 2020) and a financing
strategy (Flammer, 2021). Given the rich literature in corporate finance on the
determinants of CSR activities (e.g., Cronqvist & Yu, 2017; Harjoto et al., 2015;
McGuinness et al., 2017) and debt choices (e.g., Boubaker et al, 2018; Chen et
al, 2020; Lin et al, 2013), a focus on the determinants of corporate green bond
decisions from the perspectives of multiple governance mechanisms would be
valuable to motivate more corporate issuers into climate adaptations.
The main aim of this thesis is to investigate the role of corporate governance
mechanisms in incentivizing corporations to issue green bonds. Specifically, I
explore the impact of governance quality, board CSR orientation, and firm
network characteristics on the proclivity of corporate green bond issuances and
on the divergences in post-issue performances across bond types for the first
two essays and within the subset of green bonds for the third essay.
The first essay demonstrates that governance quality plays a key role in
the decision-making process of bond issuances. In a cross-country setting, the
empirical evidence reveals that the strong internal governance (managerial
entrenchment) has a positive (negative) effect on the proclivity of corporate
green bond issuances, ultimately leading to an increase in firm value and a
decrease in yield spreads. Such an effect is more pronounced for information-
asymmetric and financially distressed firms with greater environmental
initiatives. Country-level governance, also known as external governance, is
also a significant determinant of the propensity of a firm to issue green bonds,through which it influences investor demands for green bonds. Additional
ownership analysis suggests that corporate preferences for green bonds vary
in types of shareholders. The study sheds light on governance quality, which
may act as a complementary mechanism to the disciplinary effect of the 'green'
label in promoting value-enhancing practices.
The second essay examines the effect of board CSR orientation on corporate
green bond decisions and the post-issuance performances in a multinational
sample of firms. Drawing from agency and resource dependence theories, I find
that firms with greater CSR orientation are more likely to issue green bonds
vis-à-vis conventional ones. Additionally, these firms tend to allocate a larger
proportion of funding through green bonds, collectively affect the issuer’s both
short-run and long-run value creation and relative issuance costs associated
with green bonds as opposed to conventional bonds. The positive effect on the
proclivity of green bonds is stronger for firms with greater information
asymmetry, and those in countries with higher levels of institutional
development and regulatory support for sustainability.
The third essay examines whether the practice of issuing green bonds
spreads across green issuers via shared executive directors and non-executive
directors in Northern America and Europe. Deriving the informational role of
firm networks from the resource dependency theory and social capital theory,
the empirical evidence documents that issuers who have interlocks with
previous green bond issuers (referred to as green interlock) and better green
centrality positions, i.e., greater connectedness with prior green bond issuers,
are more inclined to start issuing green bonds. The observed positive relation
is particularly pronounced for issuers connected with prior issuers with strong
CSR commitments and complexity. The wealth generation and issuance cost
mitigation effects associated with better-connected green bond issuers as
opposed to those with lower green connectedness further demonstrate that the
issuance of green bonds can be a value-enhancing and cost-efficient practice for
green issuers with effective information transmissions via green interlocks.
With contributions to multi-theoretical perspectives under the substitution
and/or complementary, agency, resource-dependence, and social capital
theories, this thesis relates to the literature on corporate governance, CSR,
bond choices and firm networks, and more importantly, contributes to the green bond research from the perspectives of (i) the motivations of corporate
green bond issuances by highlighting the key role of corporate governance
quality, board CSR orientation and firm networks in driving corporate green
bond decisions; (ii) the factors that influence the cost of green bond financings
and the yield differentials between green bonds and conventional twins in the
primary market by providing evidence that firms with better internal
governance and board CSR orientation can lower the issuance costs when
issuing green bonds as opposed to conventional counterparts, and firms with
interlocks or located central within the network of prior green bond issuers can
mitigate the cost of green bond financings; (iii) the sources of the differences in
the firm value generated by bond type - the differences in the equity wealth at
offer announcements between green and conventional bonds are positively
related to board CSR orientation, and well-governed firms can display greater
CARs and Tobin’s Q by issuing green bonds than issue conventional bond
counterparts; (iv) the factors affecting the differences in equity wealth within
the subset of green bonds – interlocks and strong connections with prior green
bond issuers appear to be positively associated with CARs. | en |
