Environmental Risk Concern and Short-Term IPO Performance of Green Stocks During the COVID-19 Crisis Period

Jang-Chul Kim (), Sharif Mazumder and Pritam Saha
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Jang-Chul Kim: Department of Accounting, Economics, and Finance, Haile College of Business, Northern Kentucky University, Highland Heights, KY 41099, USA
Sharif Mazumder: Department of Accounting, Economics, and Finance, Haile College of Business, Northern Kentucky University, Highland Heights, KY 41099, USA
Pritam Saha: Department of Accounting and Finance, School of Business, Morgan State University, Baltimore, MD 21251, USA

JRFM, 2025, vol. 18, issue 3, 1-27

Abstract: This study examines the effect of firms’ greenness on IPO underpricing and subsequent short-term performance during the COVID-19 crisis period. Using 173 U.S. IPOs, we find that IPO underpricing is more pronounced for brown firms (i.e., firms have higher carbon footprints or operate in pollution-intensive industries) than for green firms (i.e., firms are engaged in environmentally sustainable practices). However, when we account for the exogenous change in environmental concerns, we find that an increase in environmental concerns causes lower initial day returns for brown firms. Later, we examine the post-IPO 3-month (6-month) holding period returns and find that brown firms earn higher returns than green firms when environmental concerns increase. Additionally, cross-sectional regressions indicate that firm-level characteristics, such as offer price and Hi-Tech, are positively associated, while R&D, leverage, and profitability are negatively associated with IPO.

Keywords: initial returns; environment risk; green stocks; event study (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2025
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