Sustainable finance and corporate profitability: Do green bond issuances improve financial performance?

Ismayilov, Aydin (2025) Sustainable finance and corporate profitability: Do green bond issuances improve financial performance? GAZDASÁG ÉS TÁRSADALOM, 18 (36). pp. 35-54. ISSN 0865-7823

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Abstract

This study investigates the effect of green bond issuance on fi-nancial performance in the European energy and utility sector. By refe-rencing signalling, stakeholder and institutional theories, the research eva-luates whether green bonds are useful financial instruments in addition to their environmental benefits. Using quarterly data from ten leading Euro-pean energy and utility companies, the study employs before-and-after fi-nancial analysis for key profitability metrics – net income margin, gross profit margin, return on equity, and return on assets. The findings reveal mixed results. While one firm shows significant statistical improvement for one financial metric, several firms experienced a decline of financial performance while the rest had no significant changes. The effect size analysis suggests potential practical relevance despite insignificance. The results align with existing literature suggesting that the financial benefits require a longer time horizon for green bonds to materialize. The findings contribute to the evolution of sustainable finance by emphasizing the sector-specific complexity of green bond frameworks.JEL Codes: G32, Q56

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