ESG AND UNDERWRITER REPUTATION IN IPO UNDERPRICING: A SYSTEMATIC LITERATURE REVIEW WITH COVID-19 CONTEXT
Abstract
Underpricing in Initial Public Offerings (IPOs) remains a prominent anomaly in global corporate finance, particularly during systemic shocks such as the COVID-19 pandemic. This study employs a Systematic Literature Review (SLR) of 50 peer-reviewed articles published between 2005 and 2025 to investigate the influence of Environmental, Social, and Governance (ESG) disclosure and underwriter reputation on IPO pricing, while assessing the moderating effect of the pandemic. The review reveals that transparent and standardized ESG disclosure functions as an effective non-financial signal that reduces information asymmetry and lowers underpricing. Similarly, reputable underwriters enhance investor confidence and issuer credibility, although their effectiveness is context-dependent and may decline in overheated markets or when reputational capital is exploited opportunistically. The pandemic intensified investors reliance on credible quality indicators, underscoring the critical role of ESG and underwriter reputation in stabilizing expectations under high uncertainty. Nonetheless, key research gaps persist, including the absence of standardized ESG metrics, the scarcity of longitudinal studies covering pre- and post-crisis dynamics, and the limited use of integrated models addressing both mediation and moderation mechanisms. Future research directions highlight the need for cross-disciplinary approaches, such as big data analytics and natural language processing, to refine the measurement of ESG perceptions. This study contributes by extending theoretical insights into signaling mechanisms in IPO pricing and offering practical implications for issuers, underwriters, and regulators operating in volatile market conditions.
References
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Cirillo, A., Del Giudice, M., & Raffa, M. (2017). The impact of social media on business performance: A literature review. Journal of Business Research, 75, 1–10.
Demers, E., & Lewellen, K. (2003). The marketing of initial public offerings. Journal of Financial Economics, 68(2), 333–358.
Dhaliwal, D. S., Li, O. Z., Tsang, A., & Yang, Y. G. (2011). Voluntary nonfinancial disclosure and the cost of equity capital: The initiation of corporate social responsibility reporting. The Accounting Review, 86(1), 59–100.
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Fernando, C. S., Gatchev, V. A., May, A. D., & Megginson, W. L. (2015). Prestige without purpose? Reputation, differentiation, and pricing in U.S. equity underwriting. Journal of Corporate Finance, 32, 41–63. https://doi.org/10.1016/j.jcorpfin.2015.04.002
Ferri, S., Tron, A., Colantoni, F., & Savio, R. (2023). Sustainability Disclosure and IPO Performance: Exploring the Impact of ESG Reporting †. Sustainability (Switzerland) , 15(6). https://doi.org/10.3390/su15065144
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Hadiwidjaja, R. D. H., Muditomo, A., & Trisnowati, Y. (2021). IPO Under-pricing Phenomenon Approach: Does Covid-19 Has a Negative Sectoral Impact? Journal of Accounting and Strategic Finance, 4(2), 207–221. https://doi.org/10.33005/jasf.v4i2.198
Harasheh, M. (2023). Freshen up before going public: Do environmental, social, and governance factors affect firms’ appearance during the initial public offering? Business Strategy and the Environment, 32(4), 2509–2521. https://doi.org/10.1002/bse.3261
Hu, Y., Dai, T., Li, Y., Mallick, S., Ning, L., & Zhu, B. (2021). Underwriter Reputation and IPO Underpricing: The Role of Institutional Investors in the Chinese Growth Enterprise Market. International Review of Financial Analysis, 78, 1–40.
Huang, W., Li, J., & Zhang, Q. (2019). Information asymmetry, legal environment, and family firm governance: Evidence from IPO underpricing in China. Pacific Basin Finance Journal, 57. https://doi.org/10.1016/j.pacfin.2019.01.005
İlbasmış, M. (2023). Underpricing and aftermarket performance of IPOs during the Covid-19 period: Evidence from Istanbul stock exchange. Borsa Istanbul Review, 23(3), 662–673. https://doi.org/10.1016/j.bir.2023.01.004
Kang, E., & Lam, N. B. (2023). The impact of environmental disclosure on initial public offering underpricing: Sustainable development in Singapore. Corporate Social Responsibility and Environmental Management, 30(1), 119–133. https://doi.org/10.1002/csr.2342
Kim, J.-C., Mazumder, S., & Saha, P. (2025). Environmental Risk Concern and Short-Term IPO Performance of Green Stocks During the COVID-19 Crisis Period. Journal of Risk and Financial Management, 18(3), 157. https://doi.org/10.3390/jrfm18030157
Kirana Astuti, D., & Djamaluddin, S. (2021). Underpricing Determinants on the Public Offering of Primary Shares (IPO) in Indonesia Stock Exchange 2015-2019. 2(1). https://doi.org/10.38035/dijefa.v2i1
Kirkulak, B., & Davis, C. (2005). Underwriter reputation and underpricing: Evidence from the Japanese IPO market. Pacific Basin Finance Journal, 13(4), 451–470. https://doi.org/10.1016/j.pacfin.2004.09.004
Loughran, T., & Ritter, J. R. (2004). Why has IPO underpricing changed over time? Financial Management, 33(3), 5–37.
Loughran, T., Ritter, J. R., & Rydqvist, K. (2024). Initial public offerings: International insights.
Maheshwari, M., & Kumar, A. (2022). Short-term IPO Performance Amidst Fearof COVID-19 Pandemic: Evidence from India. Vision. https://doi.org/10.1177/09722629221099595
Mahoney, L. S., Thorne, L., Cecil, L., & LaGore, W. (2013). A research note on standalone corporate social responsibility reports: Signaling or greenwashing? Critical Perspectives on Accounting, 24(4–5), 350–359.
Mazumder, S., & Saha, P. (2021). COVID-19: Fear of pandemic and short-term IPO performance. Finance Research Letters, 43. https://doi.org/10.1016/j.frl.2021.101977
Megginson, W. L., & Weiss, K. A. (1991). Venture Capitalist Certification in Initial Public Offerings. Journal of Finance, 46, 879–903.
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Published
2025-10-16
How to Cite
HELTYANI, Wayan Eka; WARDHANA, Putu Ariesta Pradasari.
ESG AND UNDERWRITER REPUTATION IN IPO UNDERPRICING: A SYSTEMATIC LITERATURE REVIEW WITH COVID-19 CONTEXT.
Proceedings of the International Conference of Islamic Economics and Business (ICONIES), [S.l.], v. 11, n. 1, p. 1585-1608, oct. 2025.
ISSN 2541-3333.
Available at: <https://conferences.uin-malang.ac.id/index.php/iconies/article/view/3407>. Date accessed: 12 may 2026.
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Articles
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