The Impact of National SDG Progress on IPO Underpricing: Evidence from European Markets

Abstract

This thesis explores how national SDG progress affects IPO underpricing outcomes, using a sample of 1,233 IPOs across 27 European countries between 2018 and 2023. We use OLS regression to analyze whether firms going public in countries with higher SDG scores, particularly in areas related to economic and social development experience lower underpricing. The effect is most pronounced for smaller firms, which typically face greater information asymmetry. However, we find no significant variation across ESG-sensitive industries. The results support the hypothesis that SDG performance serves as a macro-level signal of institutional quality and transparency, helping reduce investor uncertainty and improve pricing efficiency. Our findings are relevant for investors and market participants, as they highlight the potential of national sustainability indicators to influence capital market outcomes. This suggests that country-level progress on sustainable development can increase institutional credibility and improve access to capital, particularly for smaller firms.