Does sustainable development matter for initial public offering underpricing?

While many countries have made significant strides toward meeting the United Nations Sustainable Development Goals (SDGs), others continue to struggle to make progress. We connect progress toward the SDGs with capital market outcomes for firms going public. We find that the degree of underpricing in...

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Bibliographic Details
Published in:Business strategy and the environment 2024-12, Vol.33 (8), p.8361-8387
Main Author: Boulton, Thomas J.
Format: Article
Language:English
Subjects:
Backing
Capital markets
Democracy
Hypotheses
Initial public offerings
Level indicators
Prices
Sustainability
Sustainable development
Uncertainty
underpricing
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Summary:While many countries have made significant strides toward meeting the United Nations Sustainable Development Goals (SDGs), others continue to struggle to make progress. We connect progress toward the SDGs with capital market outcomes for firms going public. We find that the degree of underpricing in initial public offerings (IPOs) is lower in countries that are closer to achieving the SDGs, particularly those focused on economic and social outcomes. The relation between SDG progress and underpricing is sensitive to IPO characteristics associated with uncertainty, and country‐level indicators of democracy and cultural attributes. SDG progress is also associated with important IPO characteristics correlated with uncertainty, including offer prices, underwriter reputation, VC backing, offer size, and underwriter spreads. Together, our results support the hypothesis that SDG progress reduces uncertainty for investors, which lowers the cost of capital for IPO firms.
ISSN:0964-4733
1099-0836
DOI:10.1002/bse.3915