The Impact of Green Bond Issuance on Stock Market Performance: The Role of ESG and Financial Crises – Evidence from the US and European Markets

This study investigates the impact of green bond issuance on the stock market reaction of issuing firms, highlighting the moderating effects of Environmental, Social, and Governance (ESG) performance and financial crises. This study used an event study methodology to study 426 green bond announcements from listed non-financial firms in the United States and European markets from January,2014 to September,2025, aiming to evaluate short-term abnormal stock returns. Furthermore, regression analyses based on a sub-sample of 407 firms explore whether ESG performance and crisis conditions, particularly during the COVID-19 pandemic, affect these reactions. The findings show that investor reactions depend on timing and issuer experience. Before the crisis, green bond announcements often led to positive stock market responses, especially for first-time issuers, as investors saw them as strong signals of sustainability. During the crisis, reactions became more cautious and often negative, especially for new issuers without a solid ESG framework. In contrast, repeat issuers with strong ESG performance received stable or even positive responses. This means that the impact of green bond announcements fluctuates among firms, depending upon market conditions, ESG reputation, and whether the issuer is experienced or new. These findings strengthen the literature on sustainable finance and provide practical insights for businesses, investors, and policymakers aiming to better understand how green financing interacts with market behavior and crisis dynamics.