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On the corporate use of green bonds

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  • Mark Bagnoli
  • Susan G. Watts

Abstract

When do wholesalers issue green bonds to finance their socially responsible activities instead of charging a premium for the products they produce? We show that in less competitive retail markets when retailers can “skim” more of the premium that end consumers pay for socially responsible products, green bonds provide additional funds to help cover the cost of a wholesaler's socially responsible activities. Similar incentives arise if the wholesaler's input is a small component of the end consumers’ product, or if it is difficult for end consumers to identify the wholesaler's socially responsible activities.

Suggested Citation

  • Mark Bagnoli & Susan G. Watts, 2020. "On the corporate use of green bonds," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 29(1), pages 187-209, January.
    • Handle: RePEc:bla:jemstr:v:29:y:2020:i:1:p:187-209
    DOI: 10.1111/jems.12331
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    References listed on IDEAS

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    Cited by:

    1. Kristin Ulrike Löffler & Aleksandar Petreski & Andreas Stephan, 2021. "Drivers of green bond issuance and new evidence on the “greenium”," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 11(1), pages 1-24, March.
    2. Zhang, Xuehui & Tan, Jianhua & Chan, Kam C., 2021. "Environmental law enforcement as external monitoring: Evidence from the impact of an environmental inspection program on firm-level stock price crash risk," International Review of Economics & Finance, Elsevier, vol. 71(C), pages 21-31.
    3. LĂCĂTUŞ (BELE) Alexandra Maria, 2020. "Green Bonds: The Most Innovative Financial Instruments On The Stock Exchange," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 264-273, July.

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