Although legitimacy theory provides strong arguments that environmental, social and governance (ESG) disclosure and performance can help mitigate firm-specific (idiosyncratic) risks, this relationship has been repeatedly challenged by conceptual arguments, such as ‘transparency fallacy’ or ‘impression management’, and mixed empirical evidence. Therefore, we investigate this relationship in the revelatory case of initial public offerings (IPOs), which represent the first sale of common stock to the wider public. IPOs are characterised by strong information asymmetry between firm insiders and society, while at the same time suffering from uncertainty in firm legitimacy, culminating in amplified financial risks for both issuers and investors in aftermarket trading. Using data from the United States, we demonstrate that (1) voluntary ESG disclosure reduces idiosyncratic volatility and downside tail risk and (2) higher ESG ratings have lower associated firm-specific volatility and downside tail risk during the first year of trading in the aftermarket. We provide theoretical arguments for the relationships observed, suggesting that companies striving for ESG performance and communicating their efforts signal their compliance with sustainability-related norms, thus acquiring and upholding a societal license to operate. ESG performance and disclosure help companies build their reputation capital with investors after going public. We also report that ESG disclosure is a more consistent proxy for ex-ante uncertainty as an indicator of aftermarket risk, thereby replacing some of the more conventional measures, such as firm age, offered in the existing literature.

Quantitative and qualitative data are examined in an analysis of habitual late payment of trade credit by UK small firms. Multivariate logistic regression is employed to test the influence of variables expected to discriminate between small firms which pay late habitually and those which never or only occasionally pay late. Case studies extend quantitative analysis by validating interpretation of the results and providing explanations for unexpected outcomes. The results provide strong evidence of a financing demand for habitual late payment. There is a positive relationship between habitual late payment and difficulty obtaining bank finance and late payment by debtors and a negative relationship with the use of long term sources of finance. The influence of relationships between customer and supplier is shown to be complex. A concentrated supplier base is shown to be positively associated with late payment and case studies provide evidence that this is because increased knowledge of suppliers' credit management procedures is used to pay late without penalties. The implications of this result for the large number of firms that do not enforce their statutory right to interest on late payment are highlighted. Copyright © 2003 John Wiley & Sons, Ltd.

We decompose initial returns into deliberate premarket underpricing and aftermarket mispricing using Stochastic Frontier Analysis. We model deliberate underpricing as a function of proxies of information asymmetry surrounding IPO value between market participants. Equity retained is an unlikely signalling mechanism to convey IPO value to outside investors through deliberate premarket underpricing. The presence of lock-in agreements, underwriter fees, number of uses of proceeds, and venture capital or private equity backing have positive impacts on deliberate premarket underpricing. Demand for firms' capital also explains deliberate premarket underpricing, whereas new issues market conditions have no impact. All these factors are found to explain a significant fraction of the variations in our deliberate underpricing estimates. Deliberate underpricing is the more dominant component that makes up initial return when compared to the fraction of aftermarket mispricing. We attribute aftermarket mispricing to trading volume in IPO shares on the first day, price adjustment between the filing price range and the offer price, and offer size. Equity retained explains the aftermarket mispricing rather than the deliberate premarket underpricing in contradiction to the signalling argument. More reputable underwriters are likely to provide price support in the early aftermarket, whereas we observe no impact on deliberate premarket underpricing.Keywords: Initial IPO return, deliberate premarket underpricing, aftermarket mispricing JEL: G12, G23, G32 2 IntroductionAn initial public offering (IPO) is the first sale of shares by a private company to the public on a securities exchange. The valuation of shares of an unlisted company is challenging due to the absence of current market prices and trading history. Information asymmetry between market participants surrounding the value of these shares leaves the new issues market subject to Akerlof's (1970) Average initial return is the equally-weighted mean of the percentage change from the offer price in the premarket to the aftermarket price. Quarterly data on initial return and the number of IPOs are compiled from monthly observations available from Jay Ritter's website (http://bear.warrington.ufl.edu/ritter). 2 1 Initial return is the percentage change from the offer price to the market price in the aftermarket. See, for example, Table 1 in Banerjee, Dai, and Keshab (2011), Table 6 in Ritter (2003), and Jay Ritter's web site (http://bear.warrington.ufl.edu/ritter) that has regular updates of Table 1 in Loughran, Ritter, and Rydqvist (1994). 2 This is the URL address for all future references to Jay Ritter's IPO website. 1980q1 1981q1 1982q1 1983q1 1984q1 1985q1 1986q1 1987q1 1988q1 1989q1 1990q1 1991q1 1992q1 1993q1 1994q1 1995q1 1996q1 1997q1 1998q1 1999q1 (1998) and Aggarwal (2000Aggarwal ( , 2003 find that underwriters stabilize the aftermarket prices at the offer price which results in very few IPO stocks being overpriced.3 'Premarket' indicates the time lea...

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This study examines the relative importance of underpricing as a signal of firm value, underwriter certification, subscription levels of shares on offer, and uncertainty surrounding firm value on mispricing of initial public offerings. A sample of 100 Singaporean initial public offerings (IPOs) during the period 1998 to 2000 indicates that subscription levels of shares on offer have the most significant impact on mispricing. This is followed by offer price, market value and trading volume in IPO shares on the first day of trading, and uncertainty surrounding IPO value. Underwriter reputation appears to be only marginally influential, while equity market conditions and industry sector effects seem to be irrelevant in explaining mispricing. Singaporean IPOs have been selected because this is only one of a few markets whose unique institutional characteristics and data availability allows for such a test.