Abstract
We use the context of a company's initial public offering (IPO) of equity securities as a capital-markets setting to empirically study the economic consequences of endogenous disclosure. In particular, we examine the relation between the extent of dollar detail an IPO issuer provides regarding their intended use of proceeds and first-day underpricing. We document substantial variation in the specificity of this disclosure and find that an increase in such specificity is associated with lower IPO underpricing. Overall, our results suggest that IPOs that provide specific use-of-proceeds disclosures have less ex ante uncertainty, in the sense that these disclosures help investors estimate the dispersion of secondary market values. Our paper contributes to the empirical accounting literature by documenting an association between voluntary disclosure and what is arguably the foremost cost of raising initial equity capital (i.e., IPO underpricing).
| Original language | English (US) |
|---|---|
| Pages (from-to) | 111-153 |
| Number of pages | 43 |
| Journal | Journal of Accounting Research |
| Volume | 45 |
| Issue number | 1 |
| DOIs | |
| State | Published - Mar 2007 |
| Externally published | Yes |
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ASJC Scopus subject areas
- Finance
- Accounting
- Economics and Econometrics
Cite this
Disclosure of intended use of proceeds and underpricing in initial public offerings. / Leone, Andrew; Rock, Steve; Willenborg, Michael.
In: Journal of Accounting Research, Vol. 45, No. 1, 03.2007, p. 111-153.Research output: Contribution to journal › Article
}
TY - JOUR
T1 - Disclosure of intended use of proceeds and underpricing in initial public offerings
AU - Leone, Andrew
AU - Rock, Steve
AU - Willenborg, Michael
PY - 2007/3
Y1 - 2007/3
N2 - We use the context of a company's initial public offering (IPO) of equity securities as a capital-markets setting to empirically study the economic consequences of endogenous disclosure. In particular, we examine the relation between the extent of dollar detail an IPO issuer provides regarding their intended use of proceeds and first-day underpricing. We document substantial variation in the specificity of this disclosure and find that an increase in such specificity is associated with lower IPO underpricing. Overall, our results suggest that IPOs that provide specific use-of-proceeds disclosures have less ex ante uncertainty, in the sense that these disclosures help investors estimate the dispersion of secondary market values. Our paper contributes to the empirical accounting literature by documenting an association between voluntary disclosure and what is arguably the foremost cost of raising initial equity capital (i.e., IPO underpricing).
AB - We use the context of a company's initial public offering (IPO) of equity securities as a capital-markets setting to empirically study the economic consequences of endogenous disclosure. In particular, we examine the relation between the extent of dollar detail an IPO issuer provides regarding their intended use of proceeds and first-day underpricing. We document substantial variation in the specificity of this disclosure and find that an increase in such specificity is associated with lower IPO underpricing. Overall, our results suggest that IPOs that provide specific use-of-proceeds disclosures have less ex ante uncertainty, in the sense that these disclosures help investors estimate the dispersion of secondary market values. Our paper contributes to the empirical accounting literature by documenting an association between voluntary disclosure and what is arguably the foremost cost of raising initial equity capital (i.e., IPO underpricing).
UR - http://www.scopus.com/inward/record.url?scp=33846561119&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=33846561119&partnerID=8YFLogxK
U2 - 10.1111/j.1475-679X.2006.00229.x
DO - 10.1111/j.1475-679X.2006.00229.x
M3 - Article
AN - SCOPUS:33846561119
VL - 45
SP - 111
EP - 153
JO - Journal of Accounting Research
JF - Journal of Accounting Research
SN - 0021-8456
IS - 1
ER -