Zihang Peng

We investigate whether climate change disclosures in initial public offering (IPO) prospectuses affect the information environment in the IPO market. We find that climate change disclosures are associated with lower IPO underpricing. Further analyses reveal that reputable underwriters and the Securities Exchange Commission's Commission Guidance Regarding Disclosure Related to Climate Change enhance the information role of climate change disclosures in the IPO market. We demonstrate that firms with more extensive climate change disclosures provide stronger hedging benefits against climate change risks in the post‐IPO period. Overall, our results support the crucial role of climate change disclosures in improving the information environment of the IPO market.