Short-Term Profitability Pressure Following Green Bond Issuance: Evidence from China’s Listed Heavy-Polluting Enterprises

Green bonds have become an important financial instrument for supporting environmental investment and industrial transformation. This paper examines short-term profitability dynamics around first green bond issuance among heavy-polluting firms listed on China’s A-share market. Using a staggered-adoption framework based on the group-time average treatment effect estimator of Callaway and Sant’Anna we compare issuing firms after issuance with never-issuing and not-yet-issuing firms while controlling for firm characteristics, firm fixed effects, and year fixed effects. The estimates show that issuing firms experience an average post-issuance ROE decline of approximately 4.9 percentage points during the four years following issuance. Given that the average ROE in the sample is 0.0702, this estimate is economically substantial. Because green bond issuance is a voluntary corporate financing decision rather than an externally assigned policy shock, the estimates are interpreted as treatment-on-the-treated effects under the assumptions of no anticipation, overlap, and conditional parallel trends. Additional diagnostics and a DuPont-style mechanism analysis suggest that the post-issuance ROE decline is mainly associated with lower net profit margins and, to a lesser extent, lower asset turnover. Heterogeneity analyses indicate that the post-issuance profitability pressure varies across ownership types, regions, and industries.