Research On The Impact Of Green Bonds Issued By Enterprises On The Implied Cost Of Capital

At present,with China’s "dual carbon" target driving the rapid development of the green bond market,the issuance volume has increased year by year,and has become the world’s second largest green bond issuance market,which has brought social and economic benefits.Existing studies have mainly focused on the pricing of green bonds,with less attention paid to the impact of green bonds on issuing enterprises.With the support of relevant policies in China,the issuance of green bonds by enterprises has certain cost advantages over traditional bonds,which may have a positive impact on reducing the implied cost of capital.In order to promote the further development of China’s green bond market,it is necessary to clarify the impact of issuing green bonds on enterprises and the mechanism behind it,so as to provide reference for the government,the market and enterprises.Based on bond pricing theory,enterprise reputation theory,information transmission theory,stakeholder theory and so on,This paper analyses the impact of green bond issuance on the implicit cost of capital,the intermediary mechanism of green bond issuance to reduce the implicit cost of capital by improving equity liquidity and reducing financial risk,and the media attention and analyst attention will weaken the impact of green bond issuance on the implicit cost of capital.In the empirical analysis section,This paper first investigates the green premium in the bond market: all A-share listed companies issuing green bonds from 1 January 2016 to 30 June 2022 are used as a sample and traditional bonds are matched by the PSM method.A comparison between green bonds and traditional bonds reveals that the credit spread of green bonds is lower than that of traditional bonds on bonds issued in the eastern region and on highly rated bonds,and there is a negative green premium,indicating that the cost of issuing green bonds in China is gradually becoming manageable and sustainable.Secondly,in order to more accurately describe the implied cost of capital and reflect the expected returns of market participants when investing in capital,this paper calculates the implied cost of capital based on the abnormal return growth model,and uses the DID model to find that issuing green bonds can significantly reduce the implied cost of capital.Again,this paper introduces two mediating variables,namely equity liquidity and early warning indicators of enterprise financial risk,and conducts a mediating effect test.The empirical results show that issuing green bonds can reduce the implicit cost of capital by increasing equity liquidity and reducing enterprise financial risk.Finally,the article examines the moderating mechanism and finds that as media attention and analysts’ attention increases,the effect of green bond issuance on the reduction of the implied cost of capital decreases.A robustness check including the replacement of the implied cost of capital is also conducted and the findings still hold.Based on the above researches,this paper makes recommendations from three aspects: firstly,at the government level,third-party green certification should be strengthened and supportive policies should be introduced.Secondly,at the market level,default clauses need to be improved,issuers need to be strengthened and creditor protection mechanisms need to be improved.Finally,at the enterprise level,it should familiarise itself with the issuance process,strengthen risk control and make timely repayment of capital and interest to maintain its reputation.