The choice of green bond financing instruments

Dou, Xiangsheng; Qi, Shuxiu A icle The choice o g een bond inancing ins umen s Cogen Business & Managemen P o ided in Coope a ion wi h: Taylo & F ancis G oup Sugges ed Ci a ion: Dou, Xiangsheng; Qi, Shuxiu (2019) : The choice o g een bond inancing ins umen s, Cogen Business & Managemen , ISSN 2331-1975, Taylo & F ancis, Abingdon, Vol. 6, pp. 1-19, h ps://doi.o g/10.1080/23311975.2019.1652227 This Ve sion is a ailable a : h ps://hdl.handle.ne /10419/206225 S anda d-Nu zungsbedingungen: Die Dokumen e au EconS o dü en zu eigenen wissenscha lichen Zwecken und zum P i a geb auch gespeiche und kopie we den. Sie dü en die Dokumen e nich ü ö en liche ode komme zielle Zwecke e iel äl igen, ö en lich auss ellen, ö en lich zugänglich machen, e eiben ode ande wei ig nu zen. So e n die Ve asse die Dokumen e un e Open-Con en -Lizenzen (insbesonde e CC-Lizenzen) zu Ve ügung ges ell haben soll en, gel en abweichend on diesen Nu zungsbedingungen die in de do genann en Lizenz gewäh en Nu zungs ech e. Te ms o use: Documen s in EconS o may be sa ed and copied o you pe sonal and schola ly pu poses. You a e no o copy documen s o public o comme cial pu poses, o exhibi he documen s publicly, o make hem publicly a ailable on he in e ne , o o dis ibu e o o he wise use he documen s in public. I he documen s ha e been made a ailable unde an Open Con en Licence (especially C ea i e Commons Licences), you may exe cise u he usage igh s as speci ied in he indica ed licence. h ps://c ea i ecommons.o g/licenses/by/4.0/ BANKING & FINANCE | RESEARCH ARTICLE The choice o g een bond inancing ins umen s Xiangsheng Dou 1 and Shuxiu Qi 1 * Abs ac : G een bonds, as one o he main ools o g een inance, ha e become an impo an choice o en e p ises in g een indus ies. The e o e, i has become an impo an heo e ical and p ac ical ho opic whe he o selec and wha ac o s a ec a choice o issue labeled g een bonds o en e p ises ha mee he s anda ds o g een bonds. This pape employs he Logi model o demons a e he impac o policy di e ence on he choice o g een bond inancing ins umen s. The esul s indica e ha he ype o bonds and he pu pose o aising unds a e he impo an ac o s a ec ing en e p ises o issue labeled g een bonds unde policy di e ence caused by “mul i-sec o supe ision”on China’s bond ma ke s. The go e nmen mus make ull use o hese key ac o s o o mula e ele an policies o p omo e he de elopmen o g een bond inancing ma ke . Subjec s: Indus ial Economics; Co po a e Finance; In es men & Secu i ies Keywo ds: g een bonds; g een bond inancing; deb inancing; labeled g een bonds; non- labeled g een bonds JEL CLASSFICATION: G11; G31; G32; G38 1. In oduc ion In ecen yea s, he issuance o China’s g een bonds o se ing g een indus ies is booming o deal wi h he p oblem o unds in g een economy de elopmen . In Janua y 2016, Shanghai Pudong De elopmen Bank issued China’s i s g een inancial bond unde he impe us o a se ies o policies, which ma ked he o mal launch o labeled g een bonds in China. Rele an policies issued by China’s cen al and loca ion go e nmen au ho i ies a e impo an ac o s d i ing g een bond ma ke de elopmen in China, which is di e en om he spon aneous o ma ion o in e na ional g een bond ma ke s. G een bond is a special kind o bond o aise unds o g een indus ies o p ojec s. In p ac ice, some coun ies and in e na ional o ganiza ions ha e o mula ed di e en g een bond ecogni ion ABOUT THE AUTHORS Xiangsheng Dou is a p o esso in economics a he School o Economics and Managemen , Sou hwes Jiao ong Uni e si y, P.R. China. He holds a Ph.D. in economics om Xiamen Uni e si y, P.R. China. He is in e es ed in in e - na ional economics, de elopmen economics and en i onmen al economics. Shuxiu Qi is a g adua e s uden o heo e ical economics a he School o Economics and Managemen , Sou hwes Jiao ong Uni e si y, P. R. China. She is in e es ed in de elopmen eco- nomics and en i onmen al economics. PUBLIC INTEREST STATEMENT G een bonds, as one o he main ools o g een inance, ha e become an impo an choice o i ms in g een indus ies. Howe e , i ms will ace wo issuing choices o labeled g een bonds o o dina y bonds, mee ing he s anda ds o g een bonds. This pape employs he Logi model o analyze he impac o policy di e ence on he choice o g een bond inancing ins umen s. The esul s show ha he ype o bonds and he pu - pose o aising unds a e he impo an ac o s a ec ing whe he en e p ises issue labeled g een bonds unde policy di e ence caused by “mul i- sec o supe ision”on China’s bond ma ke s. Dou & Qi, Cogen Business & Managemen (2019), 6: 1652227 h ps://doi.o g/10.1080/23311975.2019.1652227 © 2019 The Au ho (s). This open access a icle is dis ibu ed unde a C ea i e Commons A ibu ion (CC-BY) 4.0 license. Recei ed: 13 May 2019 Accep ed: 01 Augus 2019 Fi s Published: 13 Augus 2019 *Co esponding au ho : Shuxiu Qi, School o Economics and Managemen , Sou hwes Jiao ong Uni e si y, Chengdu 610031, Sichuan, P.R. China E-mail: [email p o ec ed] Re iewing edi o : Robin H. Luo, Xihua Uni e si y, Chengdu, China Addi ional in o ma ion is a ailable a he end o he a icle Page 1 o 19 s anda ds acco ding o he ac ual objec i e o be e iden i y and s anda dize g een bonds and o de ine he scope o g een indus ies. A p esen , he ecogni ion s anda ds o wo ldwide ecognized g een bonds a e “ he G een Bond P inciples”(GBP) and “ he Clima e Bonds S anda d”(CBS). Howe e , in China, excep ha g een en e p ise bonds ollow he “G een Bond Issuance Guidelines”p omul- ga ed by he China’s Na ional De elopmen and Re o m Commission (NDRC), g een inancial bonds, co po a e bonds, and deb inancing ins umen s all ollow he cogni i e c i e ia o “ he G een Bond Suppo P ojec Ca alogue”compiled by he China G een Finance Commission. In addi ion, China’s g een bond policy also s ipula es some ele an suppo ing measu es, such as apid app o al channels, p ojec in o ma ion disclosu e, and ex e nal ce i ica ion and assessmen . G een bonds ecognized by Chinese o icials ha e eached 238 billion yuan ($36.2 billion), 248.6 billion yuan ($37.1 billion) and 282.6 billion yuan ($42.8 billion) om 2016 o 2018, espec i ely. They include g een bonds issued by Chinese issue s o bo h inside and ou side o China and g een panda bonds. Because he de ini ion o g een bonds in China is no exac ly he same as in e na ional de ini ion, he 33%, 38% and 26% o he g een bonds issued by China om 2016 o 2018 did no mee he in e na ional de ini ion. In e na ional de ini ions exclude some p ojec s such as ossil uels and ha a leas 95% o unds mus be alloca ed o g een p ojec s, bu hey a e no s ipula ed in China’s ele an policies. Ne e heless, e en i excluding he pa s ha did no con o m o in e na ional de ini ion, China’s g een bonds s ill accoun ed o 30%, 15% and 18% o global issuance om 2016 o 2018, anking he i s , he hi d and he second in he wo ld, espec i ely. 1 The bonds ha mee he equi emen s o China’s ele an policies and named “g een bonds” a e called labeled g een bonds. I is gene ally belie ed ha he inancing cos s o labeled g een bonds a e lowe han ha o con en ional bonds (non-labeled g een bonds). Because he en i onmen al isks o p ojec s om g een bonds a e ela i ely low, he e is low de aul isk and low- isk p emium. On he o he hand, al hough he issuance o labeled g een bonds has ecei ed he ele an suppo and incen i e policies o he go e nmen , he e a e s ill a la ge numbe o non-label g een bonds ha mee g een bond ecogni ion s anda ds bu ollow gene al bond issuance sys em. The en e p ises ha mee g een bond ecogni ion s anda ds a e undoub edly bene icial i hey can aise unds wi h low inancing cos s ha come om labeled g een bonds. Howe e , in p ac ice, many en e p ises s ill choose o issue con en ional bonds (non-labeled g een bonds). I indica es ha inancing cos s a e no only an impo an ac o a ec ing and deciding he choice o en e p ises. In ac , he e a e some p oblems in China’s labeled g een bond ma ke sys em and some obs acles in he choice o en e p ises o issue labeled g een bonds. The e o e, i is o g ea signi icance o s udy he choice o g een bond inancing ins umen s o en e p ises o imp o e ele an policies and sys em, o be e se e g een en e p ises in inancing, and o p omo e sus ainable and heal hy de elopmen o g een bond ma ke s. The goal o his pape is o explo e he key ac o s ha a ec he choice o g een bond inancing ins umen s by building a Logi model. The emainde o he pape is o ganized as ollows. Sec ion 2 e iews ela ed li e a u e. Sec ion 3analyzes he choice o labeled and non-labeled g een bonds. Sec ion 4conduc s ac o analysis and esea ch hypo hesis. Sec ion 5desc ibes empi ical design. Sec ion 6is he desc ip i e s a is ical analysis o ele an a iables. Sec ion 7is esul s and discussion. The inal sec ion is conclusion. 2. Li e a u e e iew The ela ed esea ch is becoming mo e and mo e abundan wi h he de elopmen o China’sg een bond ma ke s. The exis ing li e a u e is mainly abou he de ini ion o g een bonds, issuance ma ke si ua ion, de elopmen ends, ex e nal ce i ica ion, and in e na ional expe ience (Huang & Yue, 2018;Li&Zhu,2017;Wang&Cao,2016; Wang & Xu, 2016;Zhan,2016). The ele an empi ical esea ches ocus on explo ing g een bond p ices and inancing cos s (Chen, 2018; Gong, Teng, Sai, & Dou & Qi, Cogen Business & Managemen (2019), 6: 1652227 h ps://doi.o g/10.1080/23311975.2019.1652227 Page 2 o 19 He, 2018;Qu,2017;Yao,2017). Howe e , esea ch on whe he and wha ac o s a ec he choice o g een bond inancing ins umen s o Chinese en e p ises is ela i ely sca ce. Rele an heo e ical esea ch is abundan in mode n en e p ise inancing ins umen choice o capi al s uc u e. Al hough he amous MM heo y has p o ed ha en e p ise alue was no ela ed wi h capi al s uc u e, he e is a huge di e ence be ween he eali y and he assump ions o he MM heo y, meaning ha capi al s uc u e has an impo an impac on en e p ise alue (Li, 2009). 2.1. The choice o equi y ins umen s and deb ins umen s Resea ch on he choice o inancing ins umen s o en e p ises ea ly ocused on he choice o en e p ises be ween equi y and deb . The exis ing heo ies ha e mainly ade-o heo y, agency cos heo y, pecking o de heo y, signaling heo y and ma ke iming heo y (Li, 2003; Xiao, 2004). These heo ies ha e ob ained some meaning ul conclusions. Mye s and Majlu (1984) hough ha companies would choose in e nal inancing i s ly when inancing o new p ojec s, ollowed by bond inancing, and equi y inancing inally. Jensen (1986) belie ed ha manage s had he mo al haza d o using cash low eely o p i a e bene i s, and he p essu e o epaymen o p incipal and in e es esul ing om deb issuance c ea es cons ain s o educe agency cos s. 2.2. The choice o deb ma u i y s uc u e On he choice o deb ma u i y s uc u e, schola s pu o wa d deb agency cos heo y, asym- me ic in o ma ion heo y, ax hypo hesis and liquidi y isk hypo hesis (Cao, 2009; Chen & Zhou, 2004; Xiao, 2015). These heo ies analyzed he impac o di e en ac o s on deb ma u i y om di e en pe spec i es, such as company quali y, ee cash lows, ansac ion cos s, and ax a es. Kane, Ma cus, and McDonald (1985) concluded ha he highe he ansac ion cos s o bond issuance, he longe he deb ma u i y h ough simula ion analysis. Flanne y (1986) and Kale and Noe (1990) a gued ha deb ma u i y could con ey he signals o co po a e quali y o in es o s in he case o asymme ic in o ma ion, so ha company an icipa es ha company alue will be unde es ima ed in he case o long- e m deb issuance. The e o e, hey concluded ha high-quali y companies will choose o issue sho - e m deb unde speci ic assump ions. Gene ally, he e a e wo ways o measu e he deb ma u i y s uc u e. One is “ he balance shee me hod”exp essed as he p opo ion o long- e m liabili y o o al liabili y. Ano he is he “inc e- men me hod”exp essed as he ma u i y o new deb inancing ins umen (Cao, 2009; Xiao, 2015). A la ge numbe o empi ical s udies ha e analyzed he impac o di e en ac o s on he deb ma u i y s uc u e (Lei & Zeng, 2019; Shen, 2019). 2.3. The choice o deb ins umen s The s udy o deb inancing has g adually ocused on he choice o deb inancing ins umen s o companies wi h deepening esea ch. In pa icula , mos s udies explo e he choice be ween bank loans and bond issuance o companies. Some o eign schola s belie ed ha his choice depends mainly on he deg ee o asymme ic in o ma ion ela ed o loans and bonds, he e iciency o enego ia ion and he deb agency cos s (Li, 2011). Mos schola s in China make esea ch om inancial ins i u ions and inancial managemen . Chen and Zhou (2004) hough ha banks ha e a signi ican ad an age on pa icipa ing in co po a e go e nance and supe ision, while bond inancing has ad an age on es aining deb agency cos s. Li (2011) and Cao (2013) s udied he impac o ex e nal go e nance en i onmen and inancial egula ion on he choice be ween bank loans and bond in Chinese companies. They explained ha he pa adox ha Chinese companies in de eloped inancial egions p e e o bank loans was caused by he di e en deg ee o he egula ion o he wo ins umen s om Chinese inancial egula o y au ho i ies. Dou & Qi, Cogen Business & Managemen (2019), 6: 1652227 h ps://doi.o g/10.1080/23311975.2019.1652227 Page 3 o 19 Howe e , because o he exis ence o “mul i-sec o supe ision”on China’s bond ma ke s, he e is a choice o speci ic bond ins umen s o Chinese i ms. Schola s in China ha e conduc ed empi ical esea ches on his heme, bu he e is s ill a lack o in-dep h heo e ical analysis. Based on he ques ionnai e, Li (2009) analyzed he ou comes h ough using se e al deb inancing ins umen s such as bank loans, inancial suppo s, inancial leasing and bonds by means o F iedman es , Wilcoxon symbolic es and K-S es . The esul s show ha companies p e e o use sho - e m deb ins umen s and company cha ac e is ics ha e e ec s on he choice o deb ins umen s, while companies in China ha e di icul y in long- e m deb inancing. Xu (2014) s udied he impac o i m and deb ool cha ac e is ics on he choice be ween co po a e bonds and medium- e m no es o lis ed companies and he choice be ween en e p ise bonds and medium- e m no es o non-lis ed companies in China. Li (2016) made a comp ehensi e and sys- ema ic analysis o he in e na ional bond ma ke and i s de elopmen , he supe ision and ading pla o m compa ison o China’s bond ma ke and he inancing demand o lis ed companies o issuing bonds, and empi ically s udied he inancing choices o lis ed companies by he P obi model, such as s ocks and bonds, bank loans and bonds, medium- e m no es and co po a e bonds. In he empi ical s udy o he choice o deb ins umen s, he a iables o co po a e cha ac e - is ics and bond cha ac e is ics a e gene ally included. Li (2003) belie ed ha a ious heo e ical hypo heses ela ed o capi al s uc u e we e analyzed om he pe spec i e o a speci ic company cha ac e is ic, hus he a iables ha e lec company cha ac e is ics in hese heo ies had a speci ic impac on he inancing choice o companies. In e ms o he impac o bond cha ac e is ics on he choice o inancing ins umen s, Cao (2013) a gued ha he choice o deb inancing ins umen s o companies was consis en wi h he go e nance mechanism o deb con ac . As o he e ec o deb ma u i y on he choice o issuing co po a e bonds o medium- e m no es, Li (2016) belie ed ha he ma u i y o co po a e bonds was longe han ha o medium- e m no es. The e o e, he longe he deb ma u i y o he company was, he mo e likely i was o issue co po a e bonds. Rega ding he choice o bank loans o bond issuance, Cao (2013) concluded ha in e es a es we e nega i ely co ela ed wi h he choice o bond issuance, ha is, he in e es a e o co po a e bonds was lowe han ha o bank loans. Due o he sho ime o g een bonds’eme gence and de elopmen in China, he e is no ele an heo y o empi ical esea ch on he choice o labeled g een bond and o dina y bond (non-labeled g een bond 2 ). Based on he me hod o he exis ing li e a u e on he choice o inancing ins u- men s, his pape s udies he e ec s o policy di e ences, company cha ac e is ics and bond cha ac e is ics on he choice o companies acco ding o he di e ence be ween labeled g een bonds and o dina y bonds in issuance sys em and makes u he analysis h ough empi ical es s. 3. The choice o labeled and non-labeled g een bonds 3.1. Financing heo y and ins umen choice As o he choice o inancing ins umen s, i is gene ally discussed om he pe spec i e o asym- me ic in o ma ion, agency cos s, and signaling wi h he ac ual cha ac e is ics o speci ic ins u- men s. Fo example, when analyzing he inancing choice o s ock and deb , an en e p ise can make a decision by compa ing he agency cos s o s ock and deb (Chen & Zhou, 2004). When analyzing he choice o bank loans and he issuance o en e p ise bonds, i is gene ally belie ed ha banks a e mo e e ec i e han bond in es o s in supe ising en e p ises. The e o e, he highe he deg ee o asymme ic in o ma ion, he mo e inclined he en e p ises a e o choose bank loans (Cao, 2013). The main di e ence be ween labeled and non-labeled g een bonds is he scope o inancing p ojec s and ela ed policies. Fo he en e p ises whose inancing p ojec s do no mee g een bond ecogni ion s anda ds, hey can only issue o dina y bonds. The e o e, he en e p ises, speci ically he en e p ises ha di e ence be ween he choice o labeled g een bonds and o dina y bonds Dou & Qi, Cogen Business & Managemen (2019), 6: 1652227 h ps://doi.o g/10.1080/23311975.2019.1652227 Page 4 o 19 comes mainly om speci ic policies and suppo ing measu es o labeled g een bonds, ha e o con o m o g een bond ecogni ion s anda ds. Howe e , he cu en heo ies seem o be di icul o explain he eason why companies choose o issue labeled g een bonds o o dina y bonds. Based on he me hod o he exis ing esea ches abou he choice o inancing ins umen s and conside ing ac ual policy di e ence be ween labeled g een bonds and o dina y bonds, his pape does heo e ical analysis and empi ical s udy o e i y i . 3.2. The choice o en e p ise In China, companies ha issue labeled g een bonds mus no only mee he g een bond ecogni- ion s anda ds bu also mee o he policies ha a e di e en om he o dina y bond issuance sys em. G een bond policies in China usually p o ide apid app o al channels, and meanwhile, o he equi emen s a e also made. Be o e he issuance o labeled g een bonds, en e p ises need gene ally g een ce i ica ion o assessmen opinions om an ex e nal agency. I equi es en e p ises o disclose he speci ic in o ma ion o inancing p ojec s in de ail, especially in o ma ion on en i onmen al bene i s. A e issuance, en e p ises a e encou aged o con inuously disclose he use in o ma ion o aised unds and en i onmen al in o ma ion e e y yea . Howe e , en i onmen al impac in o ma ion needs p o essional assessmen acco ding o speci ic indus ies and p ojec s, which is di icul o o dina y en e p ises. En e p ises ha choose o issue labeled g een bonds ha e o spend a ce ain amoun o labo , capi al and ime cos s on ce i ica ion and assessmen . Al hough he design o such a suppo ing sys em is ela i ely cumbe some, i can educe he nega i e impac on g een bond in es o s due o asymme ic in o ma ion o educe he possibili y o issuance ailu e. Mo eo e , i can educe he in e es cos s o bond inancing. En e p ises mus make he ad an ages o issuing labeled g een bonds (e.g. educing issuing in e es a e, apid app o al, e c.) agains addi ional cos s compa ed wi h issuing o dina y bonds (e.g. ce i ica ion, assessmen , he disclosu e o en i onmen al in o ma ion, e c.). Howe e , because ac ual si ua ion aced by di e en en e p ises is di e en , i a ec s he inancing decision o en e p ises, esul ing in di e en esul s o en e p ises mee ing he de ini ion o g een indus y on issuing labeled o non-labeled g een bonds. 4. Fac o analysis and esea ch hypo hesis 4.1. The selec ion o ac o s China’s labeled g een bond sys em is based on an o dina y bond sys em. Because China’sbond ma ke is unde he “mul i-sec o supe ision”, g een bond policies o di e en ypes o bonds a e also di e en . The e o e, i is necessa y o analyze he policy di e ence be ween labeled g een bonds and o dina y bonds acco ding o a speci ic ype. This pape chooses h ee kinds o bonds, o example, medium- e m no es, co po a e bonds (unde he supe ision o China’s Secu i ies Commission) and en e p ise bonds (unde he supe ision o China’s Na ional De elopmen and Re o m Commission). The eason is ha hei issue s a e all non- inancial en e p ises, and he ma u i y o bonds is medium and long e m, which has ce ain simila i y and compa abili y. I is gene ally belie ed ha bina y selec ion depends on wo kinds o ac o s. One is he a ibu e o he objec o be selec ed, and ano he is he a ibu e o decision-make . The exis ing li e a u e usually employs company cha ac e is ic and bond cha ac e is ic a iables in empi ical esea ch (Cao, 2013; Li, 2016; Xu, 2014). This pape di ides possible ac o s in o h ee ca ego ies such as Dou & Qi, Cogen Business & Managemen (2019), 6: 1652227 h ps://doi.o g/10.1080/23311975.2019.1652227 Page 5 o 19 policy di e ence ac o s, company cha ac e is ic ac o s, and bond cha ac e is ic ac o s o demons a e how en e p ises choose o issue labeled g een bonds o o dina y bonds. 4.2. Policy di e ence G een bonds issued by non- inancial en e p ises in China a e mainly g een en e p ise bonds unde he supe ision o he NDRC, g een co po a e bonds unde he supe ision o China Secu i ies Regula o y Commission (CSRC), and g een deb inancing ins umen s (including comme cial pape s, medium- e m no es, e c.) unde he supe ision o he People’s Bank o China (PBOC) and he Na ional Associa ion o Financial Ma ke Ins i u ional In es o s (NAFMII). The e a e some di e ences in g een bond policies issued by di e en egula o y au ho i ies, as shown in Table 1. This pape chooses he ype o bond and he pu pose o aising unds o desc ibe he impac o policy di e ence on he choice o en e p ises h ough he compa a i e analysis o speci ic policy equi emen s. 4.2.1. The ype o bonds The e is a g ea di e ence in he issuance p ocedu e o co po a e bonds, co po a e bonds, and medium- e m no es. Al hough he NDRC has g adually simpli ied he p ocedu es o he examina- ion and app o al o en e p ise bonds in ecen yea s, i is gene ally acknowledged ha he “endo semen sys em”is mo e s ingen han he “app o al sys em”and “ egis a ion sys em”. The e o e, he issuance o en e p ise bonds is mo e di icul han ha o co po a e bonds and medium- e m no es. Table 1. The compa ison o di e en g een bond sys ems En e p ise bonds Co po a e bonds Deb inancing ins umen s Au ho i y NDRC CSRC PBOC NAFMII Issuance sys em Endo semen sys em App o al sys em Regis a ion sys em G een bond policy “G een Bond Issuance Guidelines” “Guidance on Suppo ing he De elopmen o G een Bonds” “Business Guidelines o G een Deb Financing Ins umen s o Non- inancial En e p ises” Applica ion p ocedu e Based on comple e p ocedu es and deb epaymen sa egua d measu es, g een bonds adop “speeding up and simpli ying audi ”bond audi p ocedu es. The accep ance and audi ing o g een co po a e bond adop “Special audi ing”and “Immedia e audi ing o decla a ion”policy. Fo g een deb inancing ins umen s, open a g een channel o he egis a ion e iew, s eng hen he egis a ion se ice and uni y he iden i ica ion o accep ance o egis a ion no ice. Pu pose o aising unds En e p ises a e allowed o use no mo e han 50% o aising unds o epay bank loans and supply wo king capi al. The unds aised by g een co po a e bonds can be used o he cons uc ion, ope a ion, acquisi ion o g een indus ial p ojec s, o epaymen o bank loans o g een indus ial p ojec s. En e p ises should use g een deb inancing ools o aise unds o he cons uc ion, ope a ion and supplemen o suppo ing liquidi y o g een p ojec s, o epay g een loans. O he policy Adjus some access condi ions o he exis ing audi policies and ele an p o isions o en e p ise bonds. Ful ill he obliga ion o in o ma ion disclosu e, encou age ex e nal ce i ica ion o assessmen , and open special accoun o und aising. Disclose speci ic in o ma ion on g een p ojec s, es ablish und- aising supe ision accoun , and encou age ex e nal e alua ion opinions No e: Colla e and a ange hem acco ding o ele an policy in o ma ion. Dou & Qi, Cogen Business & Managemen (2019), 6: 1652227 h ps://doi.o g/10.1080/23311975.2019.1652227 Page 6 o 19 I can be seen om Table 1 ha he con enience o he e iew p ocedu e is gi en in g een policy in oduced by he h ee. In addi ion, he NDRC also lowe s some o he access condi ions o g een en e p ise bonds. The e o e, g een bond policy is so con enien ha he a ac ion and incen i e o issuing g een en e p ise bonds a e g ea e compa ed wi h co po a e bonds and medium- e m no es. As a esul , he pape makes he ollowing esea ch assump ions. Hypo hesis 1: I bonds issued a e en e p ise bonds, hen en e p ises p e e o issue labeled g een bonds compa ed wi h o he ypes. 4.2.2. The pu pose o aising unds The pu pose o aising unds is o use hem o he cons uc ion o p ojec s, he supplemen o wo king capi al, he epaymen o bank loans o he eplacemen o deb . In e na ionally, a leas 95% o he unds mus be alloca ed o g een p ojec s, bu i is no s ipula ed in China’s ele an policies. The o iginal in en ion o g een bonds is o aise unds o g een p ojec s o a ac g een in es o s. When allowed o o he pu poses, i in es o s ind ha mos o he unds o bonds a e no used o g een p ojec s, hey will educe he “g een” ecogni ion o he bonds, o e en lowe bond alua ion. Howe e , he issue always an icipa es his eac ion om in es o s. I he issue needs o use a highe p opo ion o unds o o he pu poses, in e es cos s educed h ough issuing g een bonds will no co e addi ional ansac ion cos s, such as ex e nal ce i ica ion o assessmen cos s. As a esul , i he p opo ion o unds used o g een p ojec s is high, he issue p e e s o issue labeled g een bonds, o con e sely ends o issue o dina y bonds. Howe e , conside ing China’s speci ic issuance sys em o di e en bonds, i is no ully applic- able. The e is no manda o y egula ion abou he pu poses o he cons uc ion o p ojec s and he supplemen o wo king capi als o co po a e bonds and medium- e m no es, and he eby issue s may make a decision on he basis o hei needs. Howe e , he ele an policies on en e p ise bonds speci y he use o unds, such as “allowing en e p ises o use no mo e han 40% o aised unds o wo king capi al” 3 . And he “G een Bond Issuance Guidelines”speci ies ha “en e p ises a e allowed o use no mo e han 50% o aised unds o epay bank loans and supply wo king capi al”. The e o e, companies issuing en e p ise bonds may be mo e inclined o issue g een co po a e bonds o he pu pose o supplying wo king capi al. In iew o he abo e analysis, he ollowing assump ions a e gi en. Hypo hesis 2: No conside ing policy en o cemen , he highe he p opo ion o unds used o g een p ojec cons uc ion, he mo e likely he company will be o issue labeled g een bonds. In o he wo ds, labeled g een bonds issued by company ha e a posi i e co ela ion wi h he con- s uc ion o g een p ojec s. Hypo hesis 3: Fo he issuance o o dina y i m bonds, he highe he p opo ion o unds used o wo king capi als bu no o g een p ojec cons uc ion, he mo e likely he i m will be o issue labeled g een bonds. In o he wo ds, he labeled g een bonds issued by o dina y en e p ises ha e a posi i e co ela ion wi h wo king capi als (non-g een p ojec cons uc ion). 4.3. Company cha ac e is ics Based on he exis ing li e a u e abou he impac o company cha ac e is ics on he ool selec ion, his pape chooses he ollowing wo ypes o ac o s o s udy he impac o company cha ac e - is ics on he choice o issuing labeled g een bonds. Dou & Qi, Cogen Business & Managemen (2019), 6: 1652227 h ps://doi.o g/10.1080/23311975.2019.1652227 Page 7 o 19 4.3.1. Lis ed o non-lis ed company The issuance o bonds o lis ed companies will usually cause luc ua ions in hei s ock p ices. F om he pe spec i e o asymme ic in o ma ion, cash lows and agency cos s, some schola s heo e ically belie e ha he e en s o bond issuance will cause nega i e impac s on s ock ma ke s, while he conclusions o ele an empi ical s udies a e inconsis en . In addi ion, o he s udies sugges ha i will ake a posi i e in luence when inancing e en is ela ed o social esponsibili y (Cui, 2017;Fu, Wang, & Zhang, 2010). Fo he e en s o g een bond issuance om lis ed companies, some empi ical s udies show ha hese e en s would signi ican ly inc ease hei s ock p ices, which means a posi i e announcemen e ec (Liang, 2018). The e o e, in o de o a oid he possible nega i e impac o bond issuance on s ock p ices o p e e o he posi i e e ec o social esponsibili y in o ma ion, lis ed companies end o issue labeled g een bonds. 4.3.2. Financial si ua ion Usually, company cha ac e is ics ha e a ce ain impac on he choice o inancing modes o companies (Li, 2003). Howe e , he e ec s o inancing cha ac e is ics o companies a e no ob ious o he choice be ween labeled g een bonds and o dina y bonds. F om he pe spec i e o asymme ic in o ma ion, i can be conside ed ha he deg ee o asym- me ic in o ma ion o labeled g een bonds is lowe han ha o o dina y bonds due o inc ease in he ins i u ional a angemen including he disclosu e o p ojec en i onmen al in o ma ion, ex e nal ce i ica ion o assessmen , and es ablishmen o special accoun s. The issuance o labeled g een bonds will be mo e conduci e o he a ional p icing o he bonds o he companies wi h good inancial condi ion (o quali y). On he con a y, hey a e unwilling o issue a easonable bu highe inancing cos bond bu end o choose o dina y bonds o companies wi h poo quali y. This pape concludes ha companies wi h good inancial si ua ion always p e e o issue labeled g een bonds. 4.4. Bond cha ac e is ics As o he impac o bond cha ac e is ics on he choice o speci ic deb ins umen s o companies, schola s’explana ion is mos ly based on he ac ual cha ac e is ics o al e na i e deb ins umen s (Li, 2016; Xu, 2014). Acco ding o he hough ha he choice o deb ins umen s is consis en wi h con ac go e nance mechanism (Cao, 2013) because he inancing cos s o labeled g een bonds a e lowe han ha o o dina y bonds, companies end o choose labeled g een bonds in he an icipa ion o he low in e es a es o issuance. Howe e , as he e is no di e ence in issuance ma u i y and scale be ween labeled g een bonds and o dina y bonds, so he wo ac o s can no a ec he choice o en e p ises. Howe e , om he pe spec i e o asymme ic in o ma ion, he deg ee o asymme ic in o ma- ion o labeled g een bonds is lowe han ha o o dina y bonds due o ele an ins i u ional a angemen s. The e o e, i en e p ises expec hei inancing cos s (in e es a es) o be highe be o e issuing bonds, hey p e e o choose labeled g een bonds o educe cos s. On he con a y, when inancing cos s a e expec ed o be low, conside ing addi ional ansac ion cos s such as ce i ica ion ees o issuing labeled g een bonds, he p e e ence o en e p ises o issuing labeled g een bonds will be educed. As o he ma u i y and scale o bonds, he longe he ma u i y and he la ge he scale o issuance, he mo e sensi i e he unce ain y e ec s caused by asymme ic in o ma ion will be. The e o e, when he ma u i y is longe and he scale o bonds is la ge , companies p e e o choose labeled g een bonds. Acco ding o he analysis o abo e wo aspec s, he in e es a e, ma u i y, and scale o bonds a e he ac o s a ec ing he choice o en e p ise, bu he e ec s a e unce ain. Dou & Qi, Cogen Business & Managemen (2019), 6: 1652227 h ps://doi.o g/10.1080/23311975.2019.1652227 Page 8 o 19 Table 6. Empi ical esul s o g een deb inancing ins umen s selec ion (1) (2) (3) (4) (5) Cons an e m C 4.1551*** (3.3220) 2.5613* (1.7038) 8.1903*** (4.2378) 3.8330 (1.4633) 3.1243** (2.3084) Co e explana o y a iables (policy di e ences) Use 3.7821*** (7.6894) 4.0662*** (7.5316) 3.7299*** (7.4969) 3.9567*** (7.2792) 3.8091*** (7.4173) Deb 3 xUse -12.0240*** (-5.7414) -11.4033*** (-5.7549) -12.017*** (-6.2287) -11.3393*** (-5.7400) -11.5845*** (-5.8386) Deb 1 -7.7185*** (-5.7946) -8.1374*** (-6.1738) -8.8511*** (-6.4270) -8.5813*** (-6.0419) -8.0468*** (-6.1531) Deb 2 -5.9119*** (-4.6135) -6.4190*** (-5.0532) -6.9843*** (-5.3123) -6.8591*** (-5.0155) -6.1965*** (-4.9517) Con ol a iables (company cha ac e is ic) ENT 1 0.5226 (1.2651) 0.4011 (0.9366) ENT 2 0.3501*** (3.0031) 0.4896*** (2.9859) 0.3660*** (3.2639) ENT 3 -1.4439* (-1.8812) -1.4531* (-1.8018) -2.0292*** (-2.8753) ENT 4 4.5829 (0.1188) 4.6672 (1.5303) ENT 5 -0.8085 (0.2538) -0.8556 (-1.1818) Con ol a iables (bond cha ac e is ic) Bond 1 -0.2811** (-2.0229) -0.1131 (-0.7302) Bond 2 -0.3331** (-2.5053) -0.1321 (-0.8933) Bond 3 -0.0081 (-0.5667) -0.0387 (-1.6891) McFadden R 2 0.2865 0.3374 0.3061 0.3478 0.3248 LR-s a is ic 132.6994*** 152.5400*** 141.7774*** 157.2045*** 147.9158*** Akaike in o c i e ion 0.8345 0.7987 0.8270 0.8021 0.7996 Schwa z c i e ion 0.8837 0.8985 0.9056 0.9318 0.8692 No es: a. Z-s a is ics a e epo ed in pa en heses; b. *, ** and *** deno e s a is ical signi icance a 10%, 5% and 1%, espec i ely. Dou & Qi, Cogen Business & Managemen (2019), 6: 1652227 h ps://doi.o g/10.1080/23311975.2019.1652227 Page 15 o 19 Equa ion (1–5) pass all he likelihood a io es s a he 1% signi icance le el and a e s a is ically signi ican . Meanwhile, he alues o McFadden R 2 a e accep ably high, which implies ha he equa ions a e good in he goodness o i s. In Equa ion (1-5), all he co e explana o y a iables pass he Z-s a is ic es a 1% signi icance le el, which indica es ha explana o y a iables ha e signi ican impac s on he choice o company. Howe e , he esul s o con ol a iables in each equa ion a e di e en . 7.2. The es o hypo hesis 1 In Equa ion (1-5), he coe icien s o he dummy a iables o medium- e m no es (Deb 1 ) and co po a e bonds (Deb 2 ) a e signi ican ly nega i e, indica ing ha he ac o ype o bonds has a signi ican impac on whe he companies choose o issue labeled g een bonds. Fu he , medium- e m no e o co po a e bond will weaken he endency o companies o issue labeled g een bonds, and he weakening e ec o medium- e m no es is g ea e . I con i ms he p e ious analysis on he supe ision deg ee o issuance and he con enience s eng h o g een bond policy o he h ee bonds. The e o e, hypo hesis 1 holds. 7.3. The es o hypo hesis 2 In Equa ion (1-5), he coe icien o he a iable o he p opo ion o p ojec use (Use) is signi ican ly posi i e, sugges ing ha he highe he p opo ion o unds o be used o g een p ojec cons uc ion, he mo e inclined o issue labeled g een bonds o companies. The e o e, hypo hesis 2 holds. 7.4. The es o hypo hesis 3 In Equa ion (1-5), he c oss e m “Deb 3 ×Use”has a signi ican ly nega i e coe icien , indica ing ha he lowe he p opo ion o unds in ended o g een p ojec cons uc ion, he mo e likely he companies ha issue en e p ise bonds a e o issue labeled g een bonds. I is consis en wi h he p e ious analysis o he ules o en e p ise bond sys em in he use o und- aising. O dina y en e p ise bonds may use no mo e han 40% o unds o supply wo king capi al, while i is elaxed o 50% o g een co po a e bonds. When en e p ises plan o use mo e p opo ion o capi als o supply wo king capi al 4 , hey will be mo e inclined o issue labeled g een bonds. Fu he , conside ing he coe icien s o he a iable “Use”and he c oss e m “Deb 3 ×Use”, he sum o bo h is nega i e in all he equa ions. I implies ha he highe he p opo ion o p ojec use, he mo e likely he en e p ises will be o choose an o dina y bond when he bond is en e p ise one. The e o e, hypo hesis 3 holds. 7.5. The discussion o he eg ession esul s o con ol a iables In e ms o company cha ac e is ics, in Equa ions (2), (4) and (5), he a iables o lis ed o non-lis ed company (ENT 1 ), p o i abili y powe (ENT 4 ), and g ow h powe (ENT 5 ) ail in he Z-s a is ic es s, espec i ely, which means ha hey ha e no s a is ically signi ican impac on he choice o labeled g een bonds. The a iable o company scale (ENT 2 ) passes he Z es a 1% signi icance le el and i s coe icien is posi i e, which indica es ha he la ge he scale, he mo e inclined he companies will be o issue labeled g een bonds. The a iable o deb ma u i y (ENT 3 ) passes he Z es and i s coe icien is nega i e, indica ing ha he lowe he p opo ion o long- e m deb , he mo e likely he companies will be o issue labeled g een bonds. In e ms o bond cha ac e is ics, in Equa ion (3), he a iable o issuing in e es a e (Bond 1 ) passes he Z-s a is ic es a he signi icance le el o 5% and i s coe icien is nega i e, which indica es ha he lowe he a e, he mo e likely he companies will be o issue labeled g een bonds. I is consis en wi h he conclusion o he p e ious analysis om he pe spec i e o con ac go e nance mechanism. The a iable o bond ma u i y (Bond 2 ) passes he Z-s a is ic es a he signi icance le el o 5% and i s coe icien is nega i e, which indica es ha he sho e he ma u i y, he mo e likely he companies will end o issue labeled g een bonds. Howe e , he esul is inconsis en wi h he p e ious analysis. I can be ela ed o he ac ha China’s g een bond ma ke is no ma u e enough a he ea ly s age o de elopmen . The Dou & Qi, Cogen Business & Managemen (2019), 6: 1652227 h ps://doi.o g/10.1080/23311975.2019.1652227 Page 16 o 19 a iable o issuance scale (Bond 3 ) ails in he Z-s a is ic es , which shows ha i has no signi ican impac on he choice o companies. Howe e , in Equa ion (4), bond cha ac e is ic a iables all ail in he Z-s a is ic es , due o he mul iple collinea i y p oblems caused by co ela ion be ween bond cha ac e is ic a iables and inancial condi ion cha ac e is ic a i- ables (Qi, 2019). 7.6. Robus ness es In o de o es he obus ness o he model, his pape eplaces inancial condi ion a iables ENT 2, …, ENT 5 o he da a o he p e ious yea wi h he a e age o he p e ious 3 yea s a he ime o he issuance o g een bonds. The Equa ions (6,7) a e es ablished, and he esul s a e showninTable7. To compa e Equa ion (4–7) espec i ely, he esul s o McFadden R 2 and he likelihood a io es do no change a e eplacing a iable da a. In addi ion, a iables included in he inal model ha e no changed, and he coe icien symbols o all a iables ha e no changed, and he coe icien s ha e ha dly changed. On he whole, a e eplacing he indica o s, he models ha e no signi ican di e ence. The e o e, he models a e obus . 8. Conclusions This pape analyses he choice o non- inancial i ms be ween labeled g een bonds and o dina y bonds (non-labeled g een bonds) in China. Based on he me hod o he exis ing esea ch abou he choice o inancing ins umen s and conside ing he ac ual policy di e ence be ween labeled g een bonds and o dina y bonds, his pape ocuses on he analysis o he impac o policy di e ence on he choice o en e p ise inancing ools. In addi ion, his pape es s he e ec s o ac o s ha impac he company’s choice o g een bond inancing ins umen s h ough aking he p opo ion o p ojec uses and he ype o bonds as co e explana o y a iables and company cha ac e is ics and bond cha ac e is ics as con ol a iables, and employing he Logi model o bina y choice. Table 7. The esul s o obus ness es (6) (7) Coe icien z-S a is ic Coe icien z-S a is ic Cons an e m C 3.1103 1.1801 3.1820** 2.3782 Co e explana o y a iables (policy di e ences) Use 4.2011*** 7.2303 3.7911*** 7.4201 Deb 3 × Use −11.1001*** −5.4631 −11.6258*** −5.8413 Deb 1 −8.4428*** −5.7743 −8.1011*** −6.1635 Deb 2 −6.7405*** −4.7961 −6.2758*** −4.9775 Con ol a iables (company cha ac e is ic) ENT 1 0.5464 1.1593 ENT 2 0.5081*** 2.9303 0.3846*** 3.4769 ENT 3 −1.5403* −1.8140 −2.1175*** −2.9676 ENT 4 4.5120 1.3731 ENT 5 −0.1258 −0.3428 Con ol a iables (bond cha ac e is ic) Bond 1 −0.1206 −0.7471 Bond 2 −0.0652 −0.4373 Bond 3 −0.0397 −1.6790 McFadden R 2 0.3672 0.3275 LR s a is ic 153.9838*** 148.7817*** Akaike in o c i e ion 0.8027 0.7985 Schwa z c i e ion 0.9422 0.8684 No e:*, ** and *** deno e s a is ical signi icance a he 10%, 5% and 1%, espec i ely. Dou & Qi, Cogen Business & Managemen (2019), 6: 1652227 h ps://doi.o g/10.1080/23311975.2019.1652227 Page 17 o 19 The esul s show ha companies issuing en e p ise bonds a e mo e likely o issue labeled g een bonds han hose o issuing medium- e m no es o co po a e bonds. Fo companies issuing medium- e m no es o co po a e bonds, when he p opo ion o unds used o g een p ojec cons uc ion ge s highe , hey p e e o issue labeled g een bonds. Howe e , o companies issuing en e p ise bonds, when he p opo ion o unds used o supplying wo king capi al ge s highe , hey end o choose labeled g een bonds. In addi ion, he la ge he company scale and he lowe he p opo ion o long- e m liabili ies o o al liabili ies, he mo e likely he companies a e o issue labeled g een bonds. Funding The au ho s ecei ed no di ec unding o his esea ch. Au ho de ails Xiangsheng Dou 1 E-mail: [email p o ec ed] ORCID ID: h p://o cid.o g/0000-0001-7795-9111 Shuxiu Qi 1 E-mail: [email p o ec ed] 1 School o Economics and Managemen , Sou hwes Jiao ong Uni e si y, Chengdu 610031, Sichuan, P.R. China. Ci a ion in o ma ion Ci e his a icle as: The choice o g een bond inancing ins umen s, Xiangsheng Dou & Shuxiu Qi, Cogen Business & Managemen (2019), 6: 1652227. No es 1. The da a come om “China G een Bond Ma ke ”(2016- 2018) p epa ed join ly by he Clima e Bonds Ini ia i e and he China Cen al Deposi o y & Clea ing Company. 2. The choice o labeled g een bonds and non-labeled g een bonds is mainly due o he di e ences in he policy sys em, a he han whe he hey mee he g een bond ecogni ion s anda ds. The e o e, in o de o high- ligh i , when o dina y bonds a e no desc ibed below, hey e e speci ically o non-labeled g een bonds. 3. 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