ESG and the Pricing of IPOs: Does Sustainability Matter

Fenili, Alessandro; Raimondo, Carlo

doi:10.2139/ssrn.3860138

Cited by 7 publications

(6 citation statements)

References 63 publications

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“…Regular communication can, consequently, be considered a positive factor in the IPO phase: communicating properly with investors and, in general, with all stakeholders is specifically relevant for the success of the process [38], showing a reduction in the level of information asymmetry. Therefore, can be assumed that there is a relevant relationship between ESG communication and the assessment in the IPO [39][40][41].…”

Section: Esg Factors and The Ipomentioning

confidence: 99%

Sustainability Disclosure and IPO Performance: Exploring the Impact of ESG Reporting

et al. 2023

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Investors are increasingly concerned with the sustainability of firms and their impact on global development, resulting in a rise in Socially Responsible Investing (SRI) that considers environmental, social, and governance (ESG) factors. Integrating sustainability into company strategies can affect various aspects of an organization, including IPOs (initial public offerings). Given the growing importance of ESG information disclosure, this study wants to examine the potential effect of an ESG report disclosure on IPO performance, since there are not studies focused on analyzing how ESG factors and IPO performance are correlated. The purpose of this study is to examine how ESG disclosure affects IPO underpricing and increases transparency for stakeholders to reduce information asymmetry. This study explores the impact of disclosing ESG information on IPO underpricing using a sample of 100 European IPOs from 2017 to 2021, with 50 firms disclosing an ESG report prior to the IPO and 50 that did not. The results showed that the publication of a sustainable report before an IPO has a positive effect on underpricing by reducing it. This finding suggests that companies that publish sustainability reports are perceived to be less risky, and investors value ESG disclosure as a tool to reduce the risks associated with ESG issues. The work contributes to the research on firms’ incentives to disclose ESG information. Our study is limited by the size of the sample, which is limited and only focused on European companies; therefore, future studies should consider companies from other parts of the world, and with more data related to IPO performance.

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Section: Esg Factors and The Ipomentioning

confidence: 99%

Sustainability Disclosure and IPO Performance: Exploring the Impact of ESG Reporting

et al. 2023

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“…For instance, underpricing is shown to be higher for IPOs of firms engaged in ESG practices because they exhibit higher post-IPO returns (Economidou et al, 2023). Disclosures related to the governance portion of ESG, in particular, seem to influence IPO pricing (Fenili and Raimondo, 2021).…”

Section: Mf 501mentioning

confidence: 99%

“…, 2023). Disclosures related to the governance portion of ESG, in particular, seem to influence IPO pricing (Fenili and Raimondo, 2021).…”

Section: Literature Reviewmentioning

confidence: 99%

“…There is a vast literature that examines ESG and firm performance, in particular during events of corporate restructuring, such as IPOs and mergers. Several studies document the challenges of evaluating performance of traditional IPO firms due to substantial information disparities between issuers and investors (Baker et al ., 2021; Fenili and Raimondo, 2021; Reber et al ., 2022). Taking advantage of SPAC procedural requirements and disclosures, we are able to isolate the effect of ESG from other firm considerations.…”

Section: Introductionmentioning

confidence: 99%

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Performance of ESG SPACs

Datar,

Emm,

Han

2023

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PurposeThe authors examine one special focus of Special Purpose Acquisition Companies (SPACs), namely environmental, social and governance (ESG) related investments. The authors document the performance of SPACs with and without ESG focus.Design/methodology/approachThe authors collect data, from several sources, on 1,737 SPAC IPOs formed between 2003 and 2022. A SPAC's focus on ESG is classified based on declared focus in Securities and Exchange Commission (SEC) filings and in post-merger annual reports. The authors examine operational and financial performance of SPACs with and without ESG focus.FindingsIn the study's sample, only 50% of SPACs that announced an intention to acquire an ESG target ended up consummating a merger with an ESG private firm. ESG SPACs exhibit worse operating performance than non-ESG SPACs. Furthermore, they experience 11.6% lower 1-year post-merger excess returns than their non-ESG counterparts.Originality/valueThe study provides an examination of ESG firms that came to market via mergers with SPACs, which is an alternative method to traditional initial public offerings (IPOs). The study also provides a comparison of both operational and stock performance of ESG and non-ESG SPACs.

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“…In addition to examining both companies' CSR practices, we also analyse their CSR narratives as presented in their IPO prospectuses, and their media coverage. This is because recent studies point to a positive relationship between CSR/ESG disclosure in IPO prospectuses, the signalling of organisational virtue during the IPO process, and IPO performance (Payne et al 2013;Fenili and Raimondo 2021;Fu et al 2022). They also suggest that the amount and type of media coverage received by IPO firms affect investors' perceptions of their legitimacy and ultimately their IPO performance (Pollock and Rindova 2003;Guldiken et al 2017).…”

Section: Introductionmentioning

confidence: 99%