The Impact of Green Bonds on Firm Value and the Role of ESG: Revisiting the Stakeholder Value Maximization Theory

Asad Arsya Brilliant Fani; Ruslan Prijadi

doi:10.22146/gamaijb.v27i3.16425

Asad Arsya Brilliant Fani University of Indonesia
Ruslan Prijadi Management Science Postgraduate Program (Program Pascasarjana Ilmu Manajemen), Fakultas Ekonomi dan Bisnis, Universitas Indonesia https://orcid.org/0000-0002-1233-9744

DOI: https://doi.org/10.22146/gamaijb.v27i3.16425

Keywords: Green bonds, corporate finance, firm value, stakeholder value maximization

Abstract

This study evaluates managers’ motivations in decision-making and whether they aim to maximize value or meet environmental and social pressures at the expense of value. The authors utilize green bonds as a treatment and measure changes in firm value data using Tobin’s Q, controlling for times and individual fixed effects and several company characteristics. This research documents the positive impact of issuing green bonds on a firm's value using the difference-in-differences (DD) method. Our findings are confirmed over the aggregate sample and most of the industry subsample, whereas we observed negative associations between green bonds and firm value only in the industrial subsample (comprising industrial and commercial services, industrial goods, and transportation). These findings align with the hypothesis of the stakeholder value maximizing theory. So, we suggest that, based on the data we analyzed about green bond issuances, companies choose to issue green bonds to increase their overall value.

Author Biographies

Asad Arsya Brilliant Fani, University of Indonesia

Fani, Asad Arsya Brilliant holds the position of Teaching Assistant at University of Indonesia, Staff at Komite Nasional Kebijakan Governansi (KNKG) and a Member of Researcher in INTIRA (Institute for Transformative Research on Sustainability and ReIigios Action). He earned his Master in 2025 in finance from University of Indonesia, and their Bachelor in 2018 in management studies from University of Darussalam Gontor. Their research interests include corporate finance, green finance and capital market. They have published in Gamaijb.

Author’s contact detail: Address: -; phone number: -; Email: asadarsyaui@gmail. com

Ruslan Prijadi, Management Science Postgraduate Program (Program Pascasarjana Ilmu Manajemen), Fakultas Ekonomi dan Bisnis, Universitas Indonesia

Prijadi, Ruslan holds the position of Professor at the Faculty of Economics and Business, University of Indonesia. He earned his Ph.D in 1997 in Business (Real Estate) from University of Wisconsin, and his MBA in 1992 from University of Wisconsin. Theirresearch interests include mergers & acquisitions, green finance, entrepreneurial finance and the circular economy. They have published in Management Descision, International Journal of Ethics and Systems, Journal of Strategy and Management, Entrepreneurial Business and Economics Review and Sustainability.

Author’s contact detail: Address: -; phone number: -; Email: ruslan.prijadi@ui.ac. id

References

Apergis, N., Poufinas, T., & Antonopoulos, A. (2022). ESG scores and cost of debt. Energy Economics, 112, 106186. https://doi.org/10.1016/j.eneco.2022.106186

Autor, D. H. (2003). Outsourcing at Will: The Contribution of Unjust Dismissal Doctrine to the Growth of Employment Outsourcing. Journal of Labor Economics, 21(1), 1–42. https://doi.org/10.1086/344122

Baulkaran, V. (2019). Stock market reaction to green bond issuance. Journal of Asset Management, 20(5), 331–340. https://doi.org/10.1057/s41260-018-00105-1

Brodback, D., Guenster, N., & Mezger, D. (2019). Altruism and egoism in investment decisions. Review of Financial Economics, 37(1), 118–148. https://doi.org/10.1002/rfe.1053

Cornell, B., & Damodaran, A. (2020). Valuing ESG: Doing Good or Sounding Good? The Journal of Impact and ESG Investing, 1(1), 76–93. https://doi.org/10.3905/jesg.2020.1.1.076

Deng, X., Kang, J., & Low, B. S. (2013). Corporate social responsibility and stakeholder value maximization: Evidence from mergers. Journal of Financial Economics, 110(1), 87–109. https://doi.org/10.1016/j.jfineco.2013.04.014

Ekawati, E. (2025). The Relationships between ESG Responsibility, Earnings Management, and Tax Aggressiveness: Evidence of the Halo Effect from Indonesia. Journal of Indonesian Economy and Business, 40(1), 75–107. https://doi.org/10.22146/jieb.v40i1.10099

Flammer, C. (2021). Corporate green bonds. Journal of Financial Economics, 142(2), 499–516. https://doi.org/10.1016/j.jfineco.2021.01.010

Goodman-Bacon, A. (2021). Difference-in-differences with variation in treatment timing. Journal of Econometrics, 225(2), 254–277. https://doi.org/10.1016/j.jeconom.2021.03.014

Hao, X., Chen, F., & Chen, Z. (2022). Does green innovation increase enterprise value? Business Strategy and the Environment, 31(3), 1232–1247. https://doi.org/10.1002/bse.2952

Hartzmark, S. M., & Sussman, A. B. (2019). Do Investors Value Sustainability? A Natural Experiment Examining Ranking and Fund Flows. The Journal of Finance, 74(6), 2789–2837. https://doi.org/10.1111/jofi.12841

Hoepner, A. G. F., Yu, P.-S., & Ferguson, J. (2010). Corporate Social Responsibility Across Industries: When Can Who Do Well by Doing Good? SSRN Electronic Journal. https://doi.org/10.2139/ssrn.1284703

Horsch, A., & Richter, S. (2017). Climate Change Driving Financial Innovation: The Case of Green Bonds. The Journal of Structured Finance, 23(1), 79–90. https://doi.org/10.3905/jsf.2017.23.1.079

Humphrey, J. E., Lee, D. D., & Shen, Y. (2012). Does it cost to be sustainable? Journal of Corporate Finance, 18(3), 626–639. https://doi.org/10.1016/j.jcorpfin.2012.03.002

Jiang, K., Chen, Z., & Chen, F. (2022). Green creates value: Evidence from China. Journal of Asian Economics, 78, 101425. https://doi.org/10.1016/j.asieco.2021.101425

Karimah, I. D., & Yudhistira, M. H. (2020). Does small-scale port investment affect local economic activity? Evidence from small-port development in Indonesia. Economics of Transportation, 23, 100180. https://doi.org/10.1016/j.ecotra.2020.100180

Khurram, M. U., Xie, W., Mirza, S. S., & Tong, H. (2023). Green bonds issuance, innovation performance, and corporate value: Empirical evidence from China. Heliyon, 9(4), e14895. https://doi.org/10.1016/j.heliyon.2023.e14895

Kroszner, R. S., & Strahan, P. E. (2001). Bankers on boards: monitoring, conflicts of interest, and lender liability. Journal of Financial Economics, 62(3), 415–452. https://doi.org/10.1016/S0304-405X(01)00082-4

Larcker, D. F., & Watts, E. M. (2020). Where’s the greenium? Journal of Accounting and Economics, 69(2–3), 101312. https://doi.org/10.1016/j.jacceco.2020.101312

Ross, S. A., Westerfield, R. W., Jaffe, J., & Jordan, B. D. (2019). Corporate Finance . MacGraw-Hill Education .

Shen, L., Zhang, Z., & Zhang, X. (2017). Key factors affecting green procurement in real estate development: a China study. Journal of Cleaner Production, 153, 372–383. https://doi.org/10.1016/j.jclepro.2016.02.021

Tang, D. Y., & Zhang, Y. (2020). Do shareholders benefit from green bonds? Journal of Corporate Finance, 61, 101427. https://doi.org/10.1016/j.jcorpfin.2018.12.001

Usman, B., Bernardes, O. T. F., & Kananlua, P. S. (2020). On the Nexus Between CSR Practices, ESG Performance, and Asymmetric information. Gadjah Mada International Journal of Business, 22(2), 151. https://doi.org/10.22146/gamaijb.54053

Wandebori, H. (2018). International Equity Placement Strategic Alliance: Exploring Stakeholder Support. Gadjah Mada International Journal of Business, 20(2), 205. https://doi.org/10.22146/gamaijb.22291

Wang, J., Chen, X., Li, X., Yu, J., & Zhong, R. (2020). The market reaction to green bond issuance: Evidence from China. Pacific-Basin Finance Journal, 60, 101294. https://doi.org/10.1016/j.pacfin.2020.101294

Woodroof, E. A. (2009). Financing Energy Management Projects. In A. Thumann & E. A. Woodroof (Eds.), Energy Project Financing: Resources and Strategies for Success (pp. 3–50). The Fairmont Press, Inc.

Yeow, K. E., & Ng, S.-H. (2021). The impact of green bonds on corporate environmental and financial performance. Managerial Finance, 47(10), 1486–1510. https://doi.org/10.1108/MF-09-2020-0481

Zerbib, O. D. (2019). The effect of pro-environmental preferences on bond prices: Evidence from green bonds. Journal of Banking & Finance, 98, 39–60. https://doi.org/10.1016/j.jbankfin.2018.10.012

Zhang, C., & Zhou, B. (2023). Where should the money go? The green effect of governmental guidance when sustainable finance impacts brown firms. Pacific-Basin Finance Journal, 78, 101961. https://doi.org/10.1016/j.pacfin.2023.101961

Zhang, R., Li, Y., & Liu, Y. (2021). Green bond issuance and corporate cost of capital. Pacific-Basin Finance Journal, 69, 101626. https://doi.org/10.1016/j.pacfin.2021.101626

Zheng, J., Jiang, Y., Cui, Y., & Shen, Y. (2023). Green bond issuance and corporate ESG performance: Steps toward green and low-carbon development. Research in International Business and Finance, 66, 102007. https://doi.org/10.1016/j.ribaf.2023.102007