ESG government risk and international IPO underpricing

Baker, Edward D.; Boulton, Thomas J.; Braga‐Alves, Marcus V.; Morey, Matthew R.

doi:10.1016/j.jcorpfin.2021.101913

Cited by 103 publications

(70 citation statements)

References 54 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…Sustainability risks refer to "the environmental, social or governance events or conditions, which, if they occur, have or may potentially have significant negative impacts on the assets, financial and earnings situation, or reputation of a supervised entity" [40]. Sustainability risks, or ESG risks, have gained attention among financial investors, stakeholders, and scholars [15,18,20,22,30,[41][42][43], and an increasing number of investors rely on ESG rating providers to measure these risks.…”

Section: Esg Risksmentioning

confidence: 99%

“…Like the ESG scores, Morningstar's rating uses a 0-100 scale, where lower scores are superior. ESG risk is divided by five risk levels: negligible (0-10), low (10)(11)(12)(13)(14)(15)(16)(17)(18)(19)(20), medium (20)(21)(22)(23)(24)(25)(26)(27)(28)(29)(30), high (30)(31)(32)(33)(34)(35)(36)(37)(38)(39)(40), and severe (40-100) [19].…”

Section: Variablesmentioning

confidence: 99%

“…Company stakeholders are increasingly interested in ESG risk and the strategies for managing it [20]. Thus, this study's main research question is whether ESG risk has an effect on SGR and if so, what are the specific effects of ESG risk on SGR?…”

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Environmental, Social, Governance Risk and Corporate Sustainable Growth Nexus: Quantile Regression Approach

Teng

Wang

et al. 2021

IJERPH

View full text Add to dashboard Cite

Despite a huge body of literature revealing that the effect of environmental, social and governance (ESG) scores on a firms' financial performance and value, it lacks the empirical research on the nexus between corporate sustainable growth and ESG risk in the existing research. The paper aims to examine the nexus between ESG risk and corporate sustainable growth. This study utilizes a quantile regression approach to explore how ESG risk affects corporate sustainable growth (proxied by sustainable growth rate, SGR). The ordinary least squares estimation results confirm that ESG significantly negatively affects corporate sustainable growth. The quantile regression results reveal ESG risk has a significant negative effect on corporate sustainable growth in the upper quantiles of SGR, but not in the lower and median quantiles. The results show that the impact of ESG risk on the corporate sustainable growth is asymmetric and affected by the distribution of SGR. Furthermore, the research results identify that the negative relationship between ESG risk and corporate sustainable growth is particularly apparent for firms in environmentally sensitive industries. This study greatly contributes to existing literature, as with this detailed knowledge, managers can make decisions based on these associations and identify the most lucrative course of action.

show abstract

Section: Esg Risksmentioning

confidence: 99%

Section: Variablesmentioning

confidence: 99%

See 1 more Smart Citation

Environmental, Social, Governance Risk and Corporate Sustainable Growth Nexus: Quantile Regression Approach

Teng

Wang

et al. 2021

IJERPH

View full text Add to dashboard Cite

show abstract

“…Thus, we can suppose that the narratives about changes in policy related to the environmental concerns might also influence IPO underpricing. It has been proved Baker et al (2021) proved that relationship between ESG state risk and underpricing of the IPO at the management level; this topic is also important for potential investors.…”

Section: Results Of Three Algorithmsmentioning

confidence: 99%

Impact of news sentiment and topics on IPO underpricing: US evidence

Fedorova

Druchok

Drogovoz

2021

IJAIM

View full text Add to dashboard Cite

Purpose The goal of the study is to examine the effects of news sentiment and topics dominating in the news field prior to the initial public offering (IPO) on the IPO underpricing. Design/methodology/approach The authors’ approach has several steps. The first is textual analysis. To detect the dominating topics in the news, the authors use Latent Dirichlet allocation. The authors use bidirectional encoder representations from transformers (BERT) pretrained on financial news corpus to evaluate the tonality of articles. The second is evaluation of feature importance. To this end, a linear regression with robust estimators and Classification and Regression Tree and Random Forest are used. The third is data. The text data consists of 345,731 news articles from Thomson Reuters related to the USA in the date range from 1 January 2011 to 31 May 2018. The data contains all the possible topics from the website, excluding anything related to sports. The sample of 386 initial public offerings completed in the USA from 1 January 2011 to 31 May 2018 was collected from Bloomberg Database. Findings The authors found that sentiment of the media regarding the companies going public influences IPO underpricing. Some topics, namely, the climate change and environmental policies and the trade war between the US and China, have influence on IPO underpricing if they appear in the media prior to the IPO day. Originality/value The puzzle of IPO underpricing is studied from the point of Narrative Economics theory for the first time. While most of the works cover only some specific news segment, we use Thomson Reuters news aggregator, which uses such sources The New York Post, CNN, Fox, Atlantic, The Washington Post ? Buzzfeed. To evaluate the sentiment of the articles, a state-of-the-art approach BERT is used. The hypothesis that some common narratives or topics in the public discussion may impose influence on such example of biased behaviour like IPO underpricing has also found confirmation.

show abstract

“…Researchers have started to use these country-level ESG data sets in various contexts, for instance, to study IPO underpricing in countries with different ESG ratings (Baker et al, 2021). Alternative metrics are provided by companies such as RepRisk -the RepRisk Country ESG Risk Index quantifies business conduct risk exposure related to country-level ESG issuesit is therefore technically not a country-level ESG rating but a business risk assessment.…”

Section: Introductionmentioning

confidence: 99%

Environmental, social and governance (ESG) performance in the context of multinational business research

Linnenluecke

2022

MBR

View full text Add to dashboard Cite

Purpose This paper aims to examine the state of research on environmental, social and governance (ESG) performance in the context of multinational business research. This paper discusses research progress as well as various issues and complexities associated with using ESG ratings in cross-country studies and for assessing the performance of multinational enterprises (MNE) and emerging market multinationals (EMNEs). Design/methodology/approach The paper identifies emerging literature that focuses on tracking the development and uptake of ESG ratings in the international context. It discusses three emerging research streams: Research examining the ESG-financial performance relationship in emerging markets, research tracking the ESG performance of multinationals in the various countries and regions they are operating, and frameworks for assessing ESG-related risks on a country level. Findings While the emerging body of work adds an important dimension to the identification and awareness of ESG issues globally, numerous unresolved issues become evident. ESG frameworks have been built to assess corporate sustainability as it relates to firms in their “home” countries (typically with a focus on developed countries), with limited applicability and transferability to emerging markets. International firm activities are often not captured in detail and not comprehensively mapped across firm subsidiaries and a firm’s corporate supply chain where ESG issues are prone to happen, and ESG scores do not comprehensively integrate views and voices from various local stakeholders that are impacted by firm activities, particularly indigenous communities. Research limitations/implications Research on ESG ratings in the context of multinational business research is generally sparse and fragmented, thus creating opportunities for future research to expand on existing and emerging findings. Practical implications The paper creates awareness of issues to consider when using ESG ratings in cross-country studies and for assessing the ESG performance of MNEs and EMNEs: ESG scores can be subject to bias and are not weighted by materiality, which can be misleading for portfolio construction and performance measurement purposes. Managers need to be aware that ESG scores are often not capturing ESG issues occurring in supply chains and ESG issues affecting local communities. Originality/value This study enriches the understanding of ESG in the context of multinational business research practice.

show abstract

ESG government risk and international IPO underpricing

Cited by 103 publications

References 54 publications

Environmental, Social, Governance Risk and Corporate Sustainable Growth Nexus: Quantile Regression Approach

Environmental, Social, Governance Risk and Corporate Sustainable Growth Nexus: Quantile Regression Approach

Impact of news sentiment and topics on IPO underpricing: US evidence

Environmental, social and governance (ESG) performance in the context of multinational business research

Contact Info

Product

Resources

About