Beyond green bonds: Stock market reactions to ESG bond announcements and issuances in Japan

This study examines the stock market reactions to the announcements and issuances of 402 ESG bonds from 153 listed Japanese firms, employing an event study methodology. Results show strong positive market reactions to green bonds and transition bonds, while sustainability bonds evoke modest short-term positivity following their announcement. Social and sustainability-linked bonds show minimal to insignificant impact, and transition-linked bonds incurs negative stock reactions. These outcomes offer insights for the market by indicating differentiated investor perceptions of ESG bonds, for issuers by highlighting positively priced green financing instruments, and for policymakers by evaluating the effectiveness of green finance policies.