What shapes greenium? New evidence from Japan

This study investigates whether green bond issuers benefit from a lower cost of borrowing at issuance. We analyze Japanese corporate bond market using a comprehensive data from 2016 till 2023. We find that only firms with credible ESG practices may benefit from lower yields. However, this greenium effect fades after 2021, coinciding with increased investor skepticism and market volatility. Our findings emphasize the importance of ESG transparency in shaping green finance outcomes and offer implications for corporate financing strategies and policy design.