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Are green IPOs priced differently? Evidence from China

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  • Wang, Zhuqing
  • Wang, Xinyu
  • Xu, Yan
  • Cheng, Qiuying

Abstract

Green IPOs raise funds for companies with environmental governance consciousness to promote sustainable development. This paper aims at investigating the pricing behavior of green IPOs and revealing the heterogeneity in pricing efficiency in the primary market and initial returns in the secondary market among green IPOs and non-green IPOs in China. Adopting stochastic frontier analysis, we disentangle deliberate premarket underpricing from the observed initial return. We find that both the green and non-green IPOs are underpriced, but green IPOs have a lower underpricing and relatively higher pricing efficiency because of market participants’ green consciousness. Besides, we find that the IPO pricing efficiency cannot significantly explain its first-day initial return, while investor sentiment and heterogeneity in firms’ green consciousness contribute more to initial returns.

Suggested Citation

  • Wang, Zhuqing & Wang, Xinyu & Xu, Yan & Cheng, Qiuying, 2022. "Are green IPOs priced differently? Evidence from China," Research in International Business and Finance, Elsevier, vol. 61(C).
    • Handle: RePEc:eee:riibaf:v:61:y:2022:i:c:s0275531922000162
    DOI: 10.1016/j.ribaf.2022.101628
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