Mandatory ESG Disclosure, Information Asymmetry, and Litigation Risk: Evidence from Initial Public Offerings

European Financial Management, Forthcoming.

59 Pages Posted: 7 Apr 2023 Last revised: 2 May 2024

Date Written: March 21, 2023

Abstract

I use the staggered adoption of mandatory ESG disclosure regulations around the world to explore the impact of ESG disclosure on initial public offering (IPO) underpricing. I find robust evidence that underpricing is substantially lower in countries with ESG disclosure mandates. High-quality disclosure environments moderate and tougher liability standards amplify the negative association between ESG disclosure mandates and underpricing, which suggests that ESG disclosure mandates reduce information asymmetry and litigation risk. The impact of ESG disclosure mandates on underpricing is stronger in countries with more pronounced environmental, social, and governance concerns.

Keywords: Disclosure, ESG, information asymmetry, IPO underpricing, litigation risk

JEL Classification: G12, G15, G18, M14

Suggested Citation

Boulton, Thomas J., Mandatory ESG Disclosure, Information Asymmetry, and Litigation Risk: Evidence from Initial Public Offerings (March 21, 2023). European Financial Management, Forthcoming., Available at SSRN: https://ssrn.com/abstract=4399682 or http://dx.doi.org/10.2139/ssrn.4399682

Thomas J. Boulton (Contact Author)

Miami University ( email )

3028 Farmer School of Business
Oxford, OH 45056
United States
(513) 529-1563 (Phone)
(513) 529-8598 (Fax)

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