The effect of issuance documentation disclosure and readability on liquidity: Evidence from green bonds

This paper investigates the potential effects of the disclosure and the readability of a green bond's issuance documentation on its liquidity. Using a sample of 274 green bonds issued by both corporate and financial issuers (102 unique firms) worldwide (23 countries) from 2011 to 2018, we show that both the disclosure of green bond frameworks and annual reports and their readability increase the bond's liquidity. Our results are robust to checks for endogeneity and to alternative estimation techniques. Both disclosure and readability have a more important impact on liquidity for bonds issued by nonfinancial (vs. financial) issuers, bonds with longer maturities, and those with lower credit ratings.