We examine the relation between corporate social responsibility (CSR) information when IPOs are offered, the level of their first-day underpricing, and investors' post-IPO holdings 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. We also exploit detailed Swedish information on stock ownership for all investors, both institutional and individual, as well as detailed Swedish household-level demographic information.

Using this unique approach, we find that first-day IPO returns and investor holdings increase with positive “environment” information in the business descriptions. In contrast, statements related to other CSR categories, such as employees, human rights, and social and community involvement made at the IPO seem to generally 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.