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The price of corporate social irresponsibility in seasoned equity offerings: International evidence

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  • Ho, Choy Yeing (Chloe)
  • Wu, Eliza
  • Yu, Jing

Abstract

We examine the impact of poor corporate social responsibility engagement signalled through negative environmental and social (E&S) incidents on equity financing via seasoned equity offerings (SEOs) across 25 countries. The results show that negative E&S incidents significantly aggravate SEO underpricing, thereby increasing the cost of raising equity capital. Managers appear to take the adverse effects into consideration as reflected in the reduced likelihood of issuing equity following the experience of negative E&S incidents. Further analysis shows that such adverse pricing effects are stronger for firms that are subject to significant social and regulatory penalties for their E&S misconducts, suggesting that negative E&S incidents increase corporate reputational losses and elevate regulatory risk. Finally, there are rich cross-country variations in the SEO pricing effects of E&S risks with legal investor protection and national culture playing an important role in influencing the pricing of E&S risk.

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  • Ho, Choy Yeing (Chloe) & Wu, Eliza & Yu, Jing, 2024. "The price of corporate social irresponsibility in seasoned equity offerings: International evidence," The British Accounting Review, Elsevier, vol. 56(4).
    • Handle: RePEc:eee:bracre:v:56:y:2024:i:4:s0890838924001082
    DOI: 10.1016/j.bar.2024.101369
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    1. D'Souza, Reagan & Ho, Choy Yeing (Chloe) & Yang, Joey W., 2024. "The cost of corporate social irresponsibility for acquirers," Journal of Banking & Finance, Elsevier, vol. 162(C).

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    More about this item

    Keywords

    Corporate social responsibility; ESG risk; Seasoned equity offerings; Event study;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G52 - Financial Economics - - Household Finance - - - Insurance
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

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