Signaling ESG disclosure readiness before listing: text-mining evidence from Indian IPO prospectuses

Introduction Environmental, social, and governance (ESG) disclosure has become central to how firms establish credibility with capital markets, yet its role at the point of market entry remains underexamined. This study investigates how Indian firms communicate ESG readiness in mainboard initial public offering (IPO) prospectuses, measuring the intensity and thematic composition of ESG-related language rather than treating disclosure as a proxy for ESG performance or quality. Methods The analytical sample comprises 310 non-financial operating-company IPO prospectuses issued from FY2021-22 to FY2025-26. Prospectus text was cleaned, segmented into sentences, and embedded using Sentence-BERT. Each sentence was matched by cosine similarity to reference sentences derived from a Baier et al.-based ESG taxonomy comprising three pillars, ten categories, and forty subcategories; sentences scoring 0.45 or above were classified as ESG-related and assigned to the corresponding pillar and subcategory. In addition to the textual analysis, the study also carried out firm-level regressions relating pillar-specific disclosure to issuer characteristics and board structure, controlling for sector, year and document length. Results ESG-related sentences constitute, on average, 11.382% of total sentences across the sample. Governance disclosure is significantly more prevalent (8.605% of clean sentences) than social (1.462%) or environmental (1.314%) disclosure, with governance accounting for 75.5% of all ESG-classified sentences. Disclosure intensity and thematic emphasis vary meaningfully across financial years, industry sectors, and ESG subcategories. Supplementary regressions reveal pillar-specific rather than uniform associations between issuer characteristics and ESG disclosure, while board size and board independence are jointly associated with governance disclosure in a parsimonious specification. Discussion These findings are consistent with, but do not establish, a credibility-related signaling channel centered on governance disclosure. In the IPO prospectuses governance-related content dominates ESG communication at listing, while environmental and social disclosure remain comparatively limited and unevenly distributed across sectors and time.