Climate change disclosure and the information environment in the initial public offering market

Jerry W. Chen; Eunice S. Khoo; Zihang Peng

doi:10.1111/acfi.13085

Climate change disclosure and the information environment in the initial public offering market

Jerry W. Chen, Eunice S. Khoo^*, Zihang Peng

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

11 Citations (Scopus)

Abstract

We investigate whether climate change disclosures in initial public offering (IPO) prospectuses affect the information environment in the IPO market. We find that climate change disclosures are associated with lower IPO underpricing. Further analyses reveal that reputable underwriters and the Securities Exchange Commission's Commission Guidance Regarding Disclosure Related to Climate Change enhance the information role of climate change disclosures in the IPO market. We demonstrate that firms with more extensive climate change disclosures provide stronger hedging benefits against climate change risks in the post-IPO period. Overall, our results support the crucial role of climate change disclosures in improving the information environment of the IPO market.

Original language	English
Pages (from-to)	907-952
Number of pages	46
Journal	Accounting and Finance
Volume	63
Issue number	S1
DOIs	https://doi.org/10.1111/acfi.13085
Publication status	Published - Apr 2023

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title = "Climate change disclosure and the information environment in the initial public offering market",

abstract = "We investigate whether climate change disclosures in initial public offering (IPO) prospectuses affect the information environment in the IPO market. We find that climate change disclosures are associated with lower IPO underpricing. Further analyses reveal that reputable underwriters and the Securities Exchange Commission's Commission Guidance Regarding Disclosure Related to Climate Change enhance the information role of climate change disclosures in the IPO market. We demonstrate that firms with more extensive climate change disclosures provide stronger hedging benefits against climate change risks in the post-IPO period. Overall, our results support the crucial role of climate change disclosures in improving the information environment of the IPO market.",

keywords = "IPO underpricing, analysts' forecasting properties, bid-ask spread, climate change disclosure, climate change risk",

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N2 - We investigate whether climate change disclosures in initial public offering (IPO) prospectuses affect the information environment in the IPO market. We find that climate change disclosures are associated with lower IPO underpricing. Further analyses reveal that reputable underwriters and the Securities Exchange Commission's Commission Guidance Regarding Disclosure Related to Climate Change enhance the information role of climate change disclosures in the IPO market. We demonstrate that firms with more extensive climate change disclosures provide stronger hedging benefits against climate change risks in the post-IPO period. Overall, our results support the crucial role of climate change disclosures in improving the information environment of the IPO market.

AB - We investigate whether climate change disclosures in initial public offering (IPO) prospectuses affect the information environment in the IPO market. We find that climate change disclosures are associated with lower IPO underpricing. Further analyses reveal that reputable underwriters and the Securities Exchange Commission's Commission Guidance Regarding Disclosure Related to Climate Change enhance the information role of climate change disclosures in the IPO market. We demonstrate that firms with more extensive climate change disclosures provide stronger hedging benefits against climate change risks in the post-IPO period. Overall, our results support the crucial role of climate change disclosures in improving the information environment of the IPO market.

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KW - analysts' forecasting properties

KW - bid-ask spread

KW - climate change disclosure

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JO - Accounting and Finance

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Climate change disclosure and the information environment in the initial public offering market

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