Disclosure Of Intended Use Of Proceeds And Underpricing In Initial Public Offerings

Topics:
IPO
Tags:
Finance,
Financial Planning,
Financial Services,
Investment,
IPO,
University Of Rochester
Source:
University of Rochester

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Overview: The authors uses the context of a company's IPO (Initial Public Offerings) of equity securities as a capital-market setting to empirically study the economic consequences of endogenous disclosure. Specifically, the relation between the extent of detail that an issuer provides regarding their intended use of the IPO proceeds and the underpricing anomaly was examined. Strong evidence was reported that increased specificity regarding the intended use of IPO proceeds is associated with lower underpricing. This provides support for rational, economic explanations for underpricing based on asymmetric information and / or agency costs. The results also suggest that, in this particular context, voluntary disclosure is associated with agency cost concerns.

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Format: PDF | Size: 90KB | Date: Feb 2003 | Pages: 34

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