In a groundbreaking global study published in Humanities and Social Sciences Communications, researchers Fatima Jamaani and Mohammed Alidarous have shed new light on the pivotal role that voluntary sustainability reporting under the Global Reporting Initiative (GRI) framework plays in shaping the fate of Initial Public Offerings (IPOs) across diverse markets. Their comprehensive analysis reveals that proactive adoption of the GRI framework is strongly linked to a markedly reduced risk of IPO withdrawal—a critical insight that could transform how firms approach transparency and risk management in capital markets worldwide.
The researchers confronted the highly complex challenge of disentangling causality and bias in the relationship between IPO withdrawal and GRI adoption. Using an advanced instrumental variable approach, they controlled for critical issues like endogeneity and reverse causality—where firms might adopt sustainability reporting in anticipation of financial difficulties, rather than vice versa. By employing the industry peer GRI adoption rate as a robust instrument, their methodology ensured that their conclusions rest on a solid statistical foundation, immune to the confounding effects of omitted or reverse pathways in causation.
Moreover, Jamaani and Alidarous accounted for clustering effects pervasive in IPO datasets—where observations are not independent but grouped by country, year, or industry sector. Clustering can artificially inflate statistical significance if unaddressed. Through the use of cluster-robust standard errors and bootstrapping techniques designed to accommodate uneven data distribution, their study mitigated these pitfalls, thereby enhancing the reliability and generalizability of the results.
Hierarchical linear modeling added another layer of rigor, allowing the researchers to parse out the influence of multi-level data structuring inherent in IPO studies. By nesting IPO observations within countries, industries, and years, they revealed that the negative association between GRI adoption and IPO withdrawal probability holds consistently—not merely as an artifact of certain industries or years, but as a robust cross-sector phenomenon.
The study also meticulously differentiated between developed and developing economies to capture institutional heterogeneity. Given that stringent regulatory environments and mature financial infrastructures in developed countries contrast with the evolving and often volatile contexts of emerging markets, unpacking these dynamics was essential. The findings affirm that across this developmental spectrum, firms voluntarily embracing the GRI framework universally enjoy a statistically significant mitigation of IPO withdrawal risk, underscoring the framework’s global relevance and adaptability.
Institutional quality further emerged as a crucial moderator in this relationship. Incorporating ten proxies for formal institutional factors—including voice and accountability, rule of law, regulatory quality, and enforcement of securities regulations—the analysis demonstrated that higher institutional quality strengthens the protective effect of GRI adoption. These formal institutional dimensions act as systemic backbones that enable sustainability reporting standards to translate into credible signals for investors, thereby reducing asymmetric information and uncertainty that might otherwise derail IPOs.
Importantly, the study also dissected the less tangible but equally influential sphere of informal institutional factors—differences in cultural norms and values that shape corporate behavior and market expectations. Utilizing Hofstede’s well-established cultural dimensions alongside Gray’s cultural secrecy index, the researchers factored in variables such as power distance, collectivism, uncertainty avoidance, and cultural secrecy. Their nuanced analysis revealed that these cultural idiosyncrasies modulate, but do not negate, the overall risk-reduction effect imparted by voluntary GRI adoption.
An innovative aspect of this work is its temporal sensitivity to the evolution of the GRI framework itself. Recognizing that the GRI standards have undergone substantial revisions since their inception in 2000, the authors incorporated dummy variables marking pivotal updates (G1 through G5). This approach allowed them to isolate the impact of different GRI versions, revealing that despite procedural and content shifts in the framework, the core benefit in terms of lowering IPO withdrawal probabilities remains consistent and significant.
This meticulous attention to the dynamic nature of sustainability reporting standards is critical, as it addresses concerns over comparability and standardization challenges that have long plagued corporate social responsibility metrics. By confirming the persistent efficacy of the GRI framework across its evolutionary cycle, the study offers reassurance to practitioners and policymakers about the framework’s enduring value.
The implications of these findings are profound. IPO withdrawals not only represent wasted resources and lost opportunities for firms and investors, but they also undermine confidence in capital markets. By demonstrating that voluntary sustainability engagement via the GRI can tangibly reduce the likelihood of such setbacks, Jamaani and Alidarous provide a compelling argument for regulators and market participants to incentivize and possibly mandate transparency initiatives.
This research further bridges the often-segregated domains of sustainability and finance, highlighting how environmental, social, and governance (ESG) factors percolate into core financial outcomes. Such insights resonate in a time when ESG considerations increasingly influence investment decisions and regulatory agendas worldwide.
Additionally, the study’s methodological contributions are noteworthy. The sophisticated application of instrumental variables, hierarchical linear modeling, and bootstrapping in a layered empirical framework sets a benchmark for future IPO and sustainability research, illustrating that rigorous quantitative approaches can unravel the complex interplay between non-financial disclosures and market dynamics.
As global financial markets grow ever more interconnected and as pressures mount for greater corporate accountability, the confirmation that sustainability reporting materially benefits firms entering public markets has transformative potential. We may anticipate that this research will catalyze both academic inquiry and practical reform, encouraging more firms to embrace voluntary sustainability reporting early in their IPO journey.
By highlighting the universality of these effects—from highly regulated developed markets to emerging economies with diverse institutional landscapes—the study substantiates the GRI framework’s role as a standardized lingua franca for sustainability disclosures in IPO contexts worldwide.
Taken together, these findings empower investors, regulators, and companies with actionable intelligence on how transparency initiatives can de-risk public offerings. As firms increasingly differentiate themselves through their commitment to sustainable practices, the GRI adoption signal may become a crucial competitive advantage in the crowded IPO landscape.
Such evidence arrives at a moment when investment paradigms are rapidly evolving, as stakeholders expect companies to not only generate financial returns but also demonstrate nuanced stewardship of environmental and social capital. The intersection of these expectations and empirical evidence on IPO outcomes underscores a promising path toward more resilient and inclusive financial markets.
Ultimately, this study by Jamaani and Alidarous marks a seminal advance in our understanding of how sustainability reporting interlocks with financial market behavior globally. Its robust methodological framework and comprehensive consideration of institutional, cultural, and temporal dimensions offer a new gold standard for examining sustainability’s impact on critical junctures of corporate finance.
As the world’s IPO ecosystem confronts fresh challenges and opportunities amid shifting regulatory landscapes and emergent global risks, the recommendation is clear: voluntary sustainability reporting within the GRI framework is no longer just a matter of corporate social responsibility, but a strategic imperative that can decisively safeguard and enhance firms’ entry into public capital markets.
Subject of Research: The impact of voluntary sustainability reporting under the Global Reporting Initiative framework on the probability of IPO withdrawal globally.
Article Title: Mitigating IPO withdrawal probability through voluntary sustainability reporting: a global analysis.
Article References:
Jamaani, F., Alidarous, M. Mitigating IPO withdrawal probability through voluntary sustainability reporting: a global analysis. Humanit Soc Sci Commun 12, 1912 (2025). https://doi.org/10.1057/s41599-025-05883-9
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