ESG practices disclosure and initial performance of Malaysian IPOS

  • 222 Views
  • 64 Downloads

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License

Companies’ decision to go public is risky because of the high uncertainty level from the companies’ unknown history prior to their listing. Recent studies in the Malaysian market reported the declining trend of companies’ initial performance, relating it to investors’ current demand for higher information transparency that can reflect companies’ sustainable evolution as a means to attract their demand in subscribing newly issued shares. Thus, this study aims to investigate the impact of disclosing ESG practices on companies’ initial performance. Using a linear regression with maximum likelihood (ML) estimation, this study examines 171 initial public offerings (IPOs) issued in the Malaysian market from 2015 to 2023. By using two ways of measuring companies’ initial performance (offer-to-open and offer-to-close), the findings show that higher information disclosure on ESG practices will only be reflective and positively affect companies’ performance by the end of the day. Further examination of individual ESG pillars indicates that environmental disclosures negatively influence companies’ initial performance, while social and governance disclosures positively influence companies’ initial performance. A large investment in maintaining a high level of environmental practice can be costly, negatively influencing companies’ performances. Higher social and governance disclosure attracts socially conscious investors and reflects good internal governance, increasing demand for the companies’ shares during the IPO and positively influencing companies’ performances. This study contributes to the growing literature concerning ESG and post-IPO performances specific to the Malaysian market and proposes recommendations on the importance of disclosing ESG practices prior to their IPO.

Acknowledgments
The authors would like to acknowledge that this article is part of a research project funded by Universiti Teknologi MARA (UiTM) for the MyRA Grant Scheme, file no: 600-RMC 5/3/GPM (118/2022).

view full abstract hide full abstract
    • Table 1. Summary of variable measurements
    • Table 2. Descriptive statistics analysis
    • Table 3. VIF analysis
    • Table 4. Ramsey RESET
    • Table 5. ESG impact on initial performance
    • Table 6. Individual impact of ESG on initial performance
    • Conceptualization
      Siti Sarah Alyasa-Gan, Norliza Che-Yahya
    • Formal Analysis
      Siti Sarah Alyasa-Gan, Nur Zahidah Bahrudin
    • Methodology
      Siti Sarah Alyasa-Gan, Norliza Che-Yahya
    • Software
      Siti Sarah Alyasa-Gan
    • Writing – original draft
      Siti Sarah Alyasa-Gan
    • Funding acquisition
      Norliza Che-Yahya
    • Supervision
      Norliza Che-Yahya, Nur Zahidah Bahrudin
    • Writing – review & editing
      Norliza Che-Yahya, Nur Zahidah Bahrudin
    • Validation
      Nur Zahidah Bahrudin
Related Articles

  • Moderating effect of internal control system to determinants influencing the financial statement disclosure

    Khoirul AswarORCID , Jumansyah Jumansyah , Sri Mulyani , Mahendro SumardjoORCID doi: http://dx.doi.org/10.21511/imfi.18(3).2021.10
    Investment Management and Financial Innovations Volume 18, 2021         Issue #3         pp. 104-112 Views: 1784 Downloads: 719 TO CITE АНОТАЦІЯ

    This study examines whether the internal control system moderates the relationship among budget expenditure, government size, legislative size, and audit findings on financial statement disclosure in Indonesia. This is a quantitative study that uses the purposive sampling technique to collect data from 240 local governments in Indonesia. Data were analyzed using Structural Equation Modelling (SEM) with Smart PLS. The results show that government size, legislative size, and audit findings had a positive and significant effect on financial statement disclosure, whereas budget expenditure does not. In addition, the findings revealed that the internal control system moderates the relationship between government size and legislative size and financial statement disclosure, but not by audit findings. The study contributed to extending the institutional and agency theory that explains these factors toward disclosure in the local government in Indonesia. The findings suggest that Indonesia’s local governments consider potential factors regarding increasing pressure to carry out disclosure of financial statements, as well as increasing the proper disclosure required by applicable Indonesian regulations.

  • The impact of listing on banks’ performance: case study from Saudi Arabia

    Mohammad AlsharifORCID doi: http://dx.doi.org/10.21511/bbs.15(3).2020.01
    Banks and Bank Systems Volume 15, 2020         Issue #3         pp. 1-9 Views: 1301 Downloads: 309 TO CITE АНОТАЦІЯ

    Using quarterly data from 2010 to 2019, this paper investigates the impact of listing status on the performance of the National Commercial Bank (NCB), the largest commercial bank in Saudi Arabia, by applying a combination of financial ratios analysis and efficient frontier analysis with a mix of parametric and non-parametric tests. The overall results show that although the NCB performance is superior compared to their counterparts, this superiority has deteriorated after the bank was listed in 2014. This result was captured by the deterioration in the efficiency measures of NCB, indicating the significance of using the efficient frontier analysis as an additional monitoring tool by the Saudi regulators. The financial ratios analysis also shows that even though the NCB profitability has increased, there is an increase in the bank’s overall risk after being listed. Therefore, Saudi regulators should closely monitor their listed banks as these banks are directed toward high-risk assets.

  • Open Contracting: a new frontier for information disclosure in public procurement

    Lawson NaidooORCID , Vinessa NaidooORCID , Marcus Ambe doi: http://dx.doi.org/10.21511/pmf.06(1).2017.03
    Public and Municipal Finance Volume 6, 2017         Issue #1         pp. 24-36 Views: 1281 Downloads: 367 TO CITE АНОТАЦІЯ

    This study was prompted by the fact that no research study focused on the application of the Open Contracting principle of disclosure in South African public procurement. The main issue examined in this study pertained to the application of the disclosure principle of Open Contracting in the South African public procurement system. The study population included members of the Chartered Institute of Procurement and Supply Chain (CIPS) employed in the South African public service. This research study used applied, exploratory and non-experimental research in conjunction with descriptive and inferential statistics. The measuring instrument designed for this study included an online survey containing a structured, close-ended questionnaire that measured the disclosure aspect covered in an in-depth literature study. With regard to the results obtained from this study, it is evident that the respondents indicated that there are opportunities to adopt the disclosure principle within South African public procurement. This study provides definite guidelines to procurement practitioners and policy makers concerning the application of proactively disclosing information at the different stages of government procurement. Disclosure in public procurement is rapidly changing and the South African public sector should keep abreast of such changes (e.g., the use of Open Contracting) to ensure that its procurement system is suitably equipped to deliver better deals, minimize fraud and corruption, ensure high quality of performance and a fairer business environment.

Download Preview
Close
Investment Management and Financial Innovations
Investment Management and Financial Innovations