Environmental, social and governance (ESG) performance and retail investor demand for IPOs

Chong, Kez Sing (2021) Environmental, social and governance (ESG) performance and retail investor demand for IPOs. [Dissertation (University of Nottingham only)]

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Abstract

The trend of environmental, social and governance (ESG) investing has been rising in prominence around the globe, previous findings found that retail investors have been increasing demand for sustainable investment too. On the other hand, Initial Public Offerings (IPOs) is an important juncture to the development of the business that enables the business to gain public exposure where the retail investor demand for IPOs is also the key to the success of IPOs.

In light of this, the present paper aims to investigate whether the ESG performance of the firm has an impact on the retail investor demand for IPO in the Malaysian market. 152 firms listed on Bursa Malaysia from January 2010-June 2020 were taken as the samples of this study. Content analysis was employed to measure the ESG performance of firms through constructing a scoring criteria index.

The result from cross-sectional analysis reveals that ESG performance is significant positive related to the retail investor demand for IPOs, indicating the importance of ESG performance as a signalling mechanism to potential investors. However, the relationship is varied when measured the ESG dimensions individually. Both environmental and social performances have shown a significant positive relationship with retail investor demand. However, the findings failed to evidence the significance of governance performance on retail investor demand. Moreover, this study reveals that the ESG performance of firms that are going to be listed on the Main market has a significant and positive impact on the retail investor demand; while the ACE market failed to evidence the significance of this relationship.

This study sheds light on bridging the literature gap between the ESG performance and retail investor demand for IPOs. The study also provides several practical implications to the regulators, business entity, underwriters, and retail investors in promoting better business sustainability and better investment decisions.

Item Type: Dissertation (University of Nottingham only)
Keywords: initial public offering (IPO), retail investor demand, oversubscription, environmental, social and governance (ESG), content analysis
Depositing User: Chong, Kez Sing
Date Deposited: 16 Apr 2021 03:41
Last Modified: 16 Apr 2021 03:41
URI: http://eprints.nottingham.ac.uk/id/eprint/63238

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