How Managing Knowledge Disclosure in Terms of ESG Information Affects IPO Performance: An Empirical Study in the European Context

Today investors are particularly interested in having a direct impact on the achievement of a sustainable global development model, and therefore they consider as very relevant the disclosure of sustainability issues of the companies in which they invest. In fact, in recent years there has been an increase in Sustainable Responsible Investing (SRI), that is an investment strategy that accounts for environmental, social and governance factors (ESG factors) into investment decisions. The integration of sustainability within corporate strategies can have an impact on various aspects of a company, including also extraordinary operations like Initial Public Offerings (IPO). The integration of these factors within the business, in fact, can affect the performance of an IPO. This study analyses the effect of disclosing ESG information on IPO performance (in terms of underpricing) using a large sample of IPO in Europe. When companies go public, the equity they sell in an IPO tends to be underpriced, resulting in a substantial price jump on the first day of trading.Given the growing importance of ESG factors and of their disclosure to all the stakeholders, the objective of this work is to examine the possible impact of the disclosure of the ESG report on the IPO performance, in terms of underpricing and, therefore, to understand how to manage it. The analysis is conducted using the European IPOs which took place between 2017 and 2021, considering a sample of 100 companies, of which 50 disclose the ESG report prior to the IPO, and 50 that did not. The study represents a contribution regarding the incentive of companies to disclose knowledge related to ESG information, with the aim to increase the level of transparency towards all the stakeholders, in order to reduce the information asymmetry which is able to increase IPO underpricing.