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: Suggested Citation