Redacting proprietary information at the initial public offering

Boone, Audra L.; Floros, Ioannis V.; Johnson, Shane A.

doi:10.1016/j.jfineco.2015.06.016

Cited by 138 publications

(95 citation statements)

References 63 publications

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“…The results suggest that these issuers might find it beneficial to withhold sensitive information, even though it could result in potentially higher capital costs. Consistent with this, Boone, Floros, and Johnson [, p. 2] examine a sample of IPOs from 1996 through 2011 and find that issuers that redact information in their prospectus are smaller, younger firms with high R&D expenditures—characteristics similar to the sample of EGC firms that disclose less information. They find that firms redacting information also have significantly higher underpricing and conclude that “shielding proprietary information is a first order determinant of underpricing.”…”

Section: Analysis Of Egc Disclosure Choicesmentioning

confidence: 81%

The JOBS Act and the Costs of Going Public

Chaplinsky

Hanley

Moon³

2017

J of Accounting Research

107

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We examine the effects of Title I of the Jumpstart Our Business Startups Act for a sample of 312 emerging growth companies (EGCs) that filed for an initial public offering (IPO) from April 5, 2012 through April 30, 2015. We find no reduction in the direct costs of issuance, accounting, legal, or underwriting fees for EGC IPOs. Underpricing, an indirect cost of issuance that increases an issuer's cost of capital, is significantly higher for EGCs compared to other IPOs. More importantly, greater underpricing is present only for larger firms that are newly eligible for scaled disclosure under the Act. Overall, we find little evidence that the Act in its first three years has reduced the measurable costs of going public. Although there are benefits of the Act that issuers appear to value, they should be balanced against the higher costs of capital that can occur after its enactment.

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Section: Analysis Of Egc Disclosure Choicesmentioning

confidence: 81%

The JOBS Act and the Costs of Going Public

Chaplinsky

Hanley

Moon³

2017

J of Accounting Research

107

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“…For details, see PricewaterhouseCoopers (2011). 3 Boone, Floros, and Johnson (2016) report that the number of IPOs dropped following the financial crisis (Table 1). 4 These exclusions (with the exception of the $5 price restriction) apply to our withdrawn/postponed IPO sample as well, which is solely used to determine the number of withdrawn/postponed IPOs, used later in the paper.…”

Section: Resultsmentioning

confidence: 99%

“…The registration watchdog, the SEC, requires firms to file amendments when there is a change in material information (e.g., expected offer price) that prospective investors should be aware of (Bradley and Jordan 2002;Loughran and Ritter 2002), which could lead to further delays. Boone, Floros, and Johnson (2016) note that many IPO firms redact proprietary information from their SEC registration filings, leading to greater initial underpricing, but superior financial performance post-IPO. Moreover, large absolute changes in price may indicate high valuation uncertainty thus resulting in longer waiting periods.…”

Section: Institutional Demand and Changes In Materials Informationmentioning

confidence: 99%

The waiting period of initial public offerings

Colaco

Cesari

Hegde

2017

The European Journal of Finance

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The length of time it takes an IPO firm to go public (called "waiting period") reflects multiple layers of scrutiny from underwriters, auditors, venture capitalists, institutional investors, and regulators. Accordingly, we show that the waiting period is a good barometer of ex ante uncertainty about future cash flows and that it has predictive power after the firm goes public. We find that firms marked by short waiting periods experience lower underpricing and less uncertainty and superior stock/operating performance in the aftermarket. We also report that smaller firms are taking longer to go public after Sarbanes-Oxley, thus providing justification for the 2012 JOBS Act.

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“…decreased IPO underpricing (seeLeone, Rock, and Willenborg 2007;Hanley and Hoberg 2010;Boone, Floros, and Johnson 2016), so it can be expected that adoption of the PD could decrease IPO underpricing for IPO firms listing on EU-regulated markets.2.3 The Status of IFRS on Exchange-Regulated MarketsAdoption of the EU's four capital market directive in the mid-2000s dramatically increased regulation for firms listed on EU-regulated markets. Concurrent with this development, many stock exchanges in the EU set up new exchange-regulated markets.…”

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confidence: 99%

“…). Prior studies show that increased IPO disclosures are associated with a reduction in IPO underpricing(Leone et al 2007;Hanley and Hoberg 2010;Boone et al 2016). HHL argue that by increasing financial disclosures and comparability, mandatory IFRS adoption would reduce information asymmetry and, hence, a "firm's need to underprice an IPO" (HHL, p. 1381).…”

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confidence: 99%

There is No Evidence that Mandatory IFRS Adoption Significantly Decreased IPO Underpricing

Byard

Darrough²,

Suh³

2019

SSRN Journal

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A recently published study (Hong, Hung, and Lobo, The Accounting Review 2014) claims to show that, depending on the benchmark sample used, the 2005 mandatory adoption of IFRS is associated with a 38-82% reduction in IPO underpricing. We reexamine this result controlling for the concurrent adoption of the Prospectus Directive (PD), which mandated increased IPO prospectus disclosures, and the enforcement of these disclosures in the member states of the European Union (EU). First, we find that there is a significant data error in Hong et al.'s study that renders their reported results unreliable: approximately 30% of the treatment firms this study categorizes as mandatory IFRS adoptions are not, in fact, subject to a mandate to report in IFRS. These are firms admitted to trading on "exchangeregulated" markets in the EU that do not require IFRS. We use hand-collected prospectus data to identify the correct treatment sample. Our analysis shows that, for affected firms, there is a statistically significant decrease in IPO underpricing associated with adoption of the PD for firms based in countries that also concurrently enhanced accounting enforcement (see Christensen, Hail, and Leuz 2013), but there is no association between mandatory IFRS adoption and IPO underpricing. We also examine voluntary IFRS adoptions by firms admitted to trading on exchange-regulated markets after 2005. Overall we find no evidence that mandatory IFRS adoption resulted in very large economic gains for IPO firms. This study also provides a brief but comprehensive description of much of EU capital markets law.

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Redacting proprietary information at the initial public offering

Cited by 138 publications

References 63 publications

The JOBS Act and the Costs of Going Public

The JOBS Act and the Costs of Going Public

The waiting period of initial public offerings

There is No Evidence that Mandatory IFRS Adoption Significantly Decreased IPO Underpricing

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