Professor Russell Wermers, University of Maryland 

"Does Corporate Social Responsibility Impact the Market for New Issues?"

Friday 17 October 2025. 15:00-16:30 Room 282 The Adam Smith Business School Building

Abstract

We examine the relation between corporate social responsibility (CSR) information, IPO underpricing, and investor post-IPO purchases using a new text-based Swedish dictionary that measures the level of CSR information contained in IPO prospectuses. Examining IPOs for the effect of promised CSR efforts on investor behavior avoids many of the potential confounding effects present in studies of seasoned equities—by their very nature, IPOs have little public information prior to their offering.  In doing so, we exploit unique detailed Swedish information on stock ownership for all investors, both institutional and individual, as well as detailed Swedish household-level demographic information. Using this granular approach, we find that first-day IPO returns and investor holdings increase with positive “environment” information in the business descriptions within prospectuses, but that statements related to other CSR categories, such as employee welfare, human rights, and social and community involvement appear to be “cheap talk” that investors discount. The investor response to CSR statements in the environment category are mainly driven by wealthy Swedish individual investors with large portfolios, as well as institutional investors. This result is consistent with the limited attention hypothesis, where investors only pay attention when there are larger financial stakes. We also find that domestic institutions have a stronger overall reaction to CSR information than foreign institutions, indicating that local Swedish investors exhibit a greater degree of concern about (local) CSR information for Swedish IPOs.   

Bio

Russ Wermers is the Paul J. Cinquegrana '63 Endowed Chair in Finance and Director of the Center for Financial Policy (CFP) at the University of Maryland at College Park.  His research, published in leading scholarly journals, has developed new approaches to measuring and attributing the performance of mutual funds, pension funds, and private equity funds, which, among other applications, can be used to identify superior active funds. Professor Wermers consults for the asset management industry. He received his Ph.D. from the University of California, Los Angeles, in December 1995.

 

First published: 30 September 2025

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