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Research Question/Issue This study investigates the performance, investment, and financing patterns of family firms after they go public. Research Findings/Insights Despite the common claim that most initial public offerings (IPOs) are motivated by growth considerations, we find that the operating performance of family firms declines after going public relative to non‐family issuers and comparable private firms. This effect is long‐lasting and not due to earnings management before the IPO. We also document that family firms do not differ from other firms in terms of investment activities, but they experience a smaller decrease in leverage. Theoretical/Academic Implications The contributions of this study are threefold. First, it delves into the incentives of controlling families when facing the IPO decision. Second, while financial investors' ability to effectively time IPO decisions has been previously documented, this study shows that families, despite peculiar incentives, take their firms public before a performance decline. Third, it examines the behavior of family firms concerning the usage of IPO proceeds. Practitioner/Policy Implications Families accept diluting their stake in an IPO when they know that firm performance is about to deteriorate. This increases the relative attractiveness of the non‐pecuniary benefits of control, most of which remain with the family, over financial wealth, whose future value is expected to decrease.

One of the main controversial aspects of sustainability metrics relies on the accuracy, transparency, and reliability of the information at the basis of environmental, social and governance (ESG) scores. This paper investigates whether firms that have their ESG reporting audited by independent firms exhibit a higher quality of ESG scores. We performed an analysis investigating the change in ESG scores following the unveiling of a corporate misconduct. We documented that, overall, no significant ESG score adjustment occurs after the scandal becomes public, thus, implying that rating agencies provide an accurate interpretation of the firm’s sustainability. However, our results differed when we distinguished between audited and unaudited reports. Firms whose reports are audited by third parties did not exhibit significant changes in their scores after a scandal, whereas for companies whose reports are not audited, we detected a worsening of the ESG scores that are statistically significant. Our findings were also confirmed in a multivariate analysis. Overall, our results suggest that the reliability of ESG scores can benefit from the auditing of sustainability reporting by third parties, which has an assurance effect on the quality of the company’s ESG information.

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