Green Bond Issuance Strategies: A Stackelberg Approach with Empirical Evidence from Europe

Overview & Synopsis

This study investigates the strategic decision-making processes involved in green bond issuance through a Stackelberg game-theoretic framework, integrating corporate social responsibility (CSR) drivers and social preferences. The model explores the interactions between a regulator, positioned as the leader, and firms as followers. The regulator establishes policy incentives to foster green bond issuance, while firms determine their issuance strategies considering regulatory backing, reputational gains, and peer influences. The framework incorporates firm heterogeneity, accounting for varied responses influenced by environmental exposure, governance quality, and macroeconomic contexts. A dynamic feedback mechanism is included, enabling regulators to refine incentives based on observed behaviors, thereby enhancing alignment with environmental objectives and economic priorities. Empirical analysis using data from 22 European countries (2013-2024) underscores the critical influence of institutional governance, environmental policy support, and carbon taxation in advancing green finance. The findings offer a robust framework for policymakers and firms, delivering practical insights to harmonize sustainability ambitions with economic goals.