ABSTRACT

 

When a firm engages in corporate social irresponsibility (CSI), it generates adverse outcomes for various stakeholders, including employees, consumers, and society. For private firms that issue an initial public offering (IPO), the opaque nature of their activities becomes more transparent as the IPO process exposes them to more scrutiny and forces them to balance the needs of their various stakeholders. To understand the effect of this transparency and shift in stakeholder accountability, we deconstruct a firm’s CSI behaviors into environmental, social, and governance (ESG) activities and investigate whether an IPO mitigates these CSI behaviors. We compare firms that went public between 2015 and 2019 to firms that remained private throughout this period using a generalized synthetic control method. Results show that an IPO differentially shifts environmental, social, and governance CSI, and this also alters depending on the level of paid media and earned media. Importantly, firms engage in more social CSI and governance CSI after IPO when paid media or earned media are high, compared to firms that remain private. In contrast, firms engage in lower environmental CSI after IPO under high paid media or earned media, compared to firms that remain private. Findings provide insight into how IPOs impact irresponsible behaviors.

Keywords: Corporate Social Irresponsibility, Initial Public Offering, Paid Media, Earned Media