Mitigating IPO withdrawal probability through voluntary sustainability reporting: a global analysis

This study represents one of the first empirical investigations into the association between sustainability reporting (SR), as measured by the voluntary adoption of the Global Reporting Initiative (GRI) framework, and the probability of initial public offering (IPO) withdrawal on a global scale. Employing signalling theory, the impact of firms’ voluntary adoption of the GRI framework on the probability of IPO withdrawal is examined. The study examines a total of 33,536 IPOs across 22 different countries from 1995 to 2019, with each IPO influenced by distinct socioeconomic, legal and cultural environments. The findings provide persuasive evidence that the voluntary adoption of the GRI framework in IPO prospectuses can reduce global IPO withdrawals by as much as 65%. The study posits that the GRI framework serves as a means of signalling the quality of an IPO firm, its governance practices and its capacity to create long-term value. Consequently, the adoption of the GRI framework enhances investor confidence and diminishes information asymmetry in the IPO market. This research contributes to the existing body of knowledge on IPOs by emphasising the significance of SR in mitigating financial risks and fostering trust among stakeholders during the IPO process. It offers crucial insights for issuing companies, investors, lawmakers and scholars interested in understanding the impact of SR on IPO success and risk management. The implications of this study have far-reaching implications that surpass academic discourse, providing valuable insights into best practices within the industry, corporate decision-making processes and regulatory frameworks aimed at promoting responsible and sustainable growth in capital markets.