Uncertainty, prospectus content, and the pricing of initial public offerings

Crain, Nicholas; Parrino, Robert; Srinivasan, Raji

doi:10.1016/j.jempfin.2021.08.007

Cited by 6 publications

(2 citation statements)

References 47 publications

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“…Second, we contribute to the broader literature on how uncertainty affects the going-public decision. Prior work focuses on the effect of macro-economic (Lowry, 2003;Thanh, 2020), political (Colak, 2017Luo et al, 2017), COVID-19 induced (Baig and Chen, 2021), and other uncertainty (Barth et al, 2017;Crain et al, 2021). Unlike prior work, we offer an uncertainty measure directly impacting the firm's cash flows.…”

Section: Introductionmentioning

confidence: 99%

Oil Price Uncertainty and IPOs

Blomkvist¹,

Dimic²,

Vulanović³

2023

The Energy Journal

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We examine the impact of oil price uncertainty on IPO volume in the oil and gas sector. By using the implied volatility of oil options, a forward-looking uncertainty measure, we identify the effect of uncertainty on the going-public decision. Oil price uncertainty exhibits a strong negative relation to IPO volume. A one standard deviation decrease in the implied volatility results in a 29% increase in the number of quarterly IPOs. The effect is concentrated among the price-sensitive upstream producers. We further report that uncertainty positively impacts the IPO withdrawal decision and increases the value of postponing the offering.

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Section: Introductionmentioning

confidence: 99%

Oil Price Uncertainty and IPOs

Blomkvist¹,

Dimic²,

Vulanović³

2023

The Energy Journal

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“…Pham et al (2020) used an in-depth research of papers from Scopus and Web of Science databases to suggest a framework for a future research agenda. Crain et al (2021) scrutinized the relation between launching into the market prior due diligence and the process of book creation during determining the share prices of primary public offer to discover a complementarity between both processes. The study by Stein et al (2018) explored gaps in due diligence research with setting the technological range to discover that there are gaps in mutual relation to another area of due diligence audit, for instance.…”

Section: Introductionmentioning

confidence: 99%

Role of due diligence in business takeover

Vochozka,

Máška,

Kovač

2023

EiP

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Motivation: The topic of the article is of paramount importance in today’s ever-evolving business landscape. As companies strive to expand their operations and stay ahead of the competition, mergers and acquisitions have become a popular strategy. However, the risks and complexities associated with these transactions cannot be overlooked. Understanding the role of due diligence is essential for any organization considering a business takeover. It serves as a powerful tool to uncover potential risks, assess the viability of the transaction, and make well-informed decisions. By conducting a thorough due diligence process, companies can identify financial discrepancies, legal liabilities, operational inefficiencies, and hidden risks that may impact the success of the transaction.Aim: The goal of the research was to analyze to what extent is the resulting value of a business is affected by improperly performed due diligence. The method used for data collection was in-debt literature research based on the Web of Science database. Subsequent content analysis was used to identify the 10 most common errors that can occur during the process of due diligence. The following research used the data obtained from answering the first research question with. Ishikawa fishbone diagram was used as a specific method of causal analysis.Results: The main findings include the identification of the most common errors occurring during the performance of due diligence, such as wrong financial analysis, incomplete financial accounts, Incomplete accounting statements, or adjusting entries for receivables. The main causes include excessive work pressure on auditors, past due receivables, poor supplier vetting, or failure to document the application of prices. The research is beneficial for auditors or audited companies so that they could avoid such errors. However, there are also several limitations as it is very time and cost-consuming to deal with due diligence on a company-by-company basis. Also, the application of Ishikawa fishbone diagram and brainstorming prior to diagram depends on the number of experts involve. Another limitation is that the research results applied under current accounting legislation only, and there are different laws and regulations in different countries.

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IPO underpricing: a comparative analysis of risk factor disclosures in the financial and non-financial sectors

Bhullar,

Grover,

Tiwari

2024

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Purpose This study aims to identify mutually exclusive risk categories and determine whether these categories effectively capture the potential impact of risk disclosures on the initial returns of initial public offerings (IPOs) in the financial and non-financial sectors. Design/methodology/approach Data were collected from 131 Indian IPO prospectuses (104 non-financial and 27 financial) issued between 2015 and 2021. Content analysis was performed to identify mutually exclusive risk categories, and the effects of these categories on initial IPO returns were assessed by regression analysis Findings The findings revealed that risk factor disclosures have a significant impact on underpricing, but not all risk factors are relevant. In the current study, in the financial sector, IPO underpricing was mostly driven by technological and competitive risk factors. In the non-financial sector, underpricing was predominantly influenced by operating risk and compliance risk factors. Research limitations/implications The limitations of this study include the use of sentence-based context analysis, which does not assess the quality of risk disclosures. The statistical data reduction technique used to generate mutually exclusive risk categories may also be a limitation. Practical implications This research has the potential to assist companies in standardizing the disclosure of risks within IPO prospectuses. The insights gained can inform market regulators in designing policies aimed at aiding investors in formulating investment strategies, ultimately enhancing transparency and clarity regarding information disclosure. Moreover, the findings offer valuable guidance to investors in selecting IPOs aligned with their risk tolerance levels. Social implications From a societal perspective, this study represents advancements by guiding regulators towards developing and regulating standardized, mutually exclusive risk factors. Such measures can aid investors in enhancing their decision-making perspectives regarding IPOs, promoting a more informed and confident investment environment. Originality/value This study is a pioneering attempt to address knowledge gaps by identifying distinct categories of risk disclosures in IPO prospectuses and examining their potential influence on IPO underpricing in the financial and non-financial sectors in India.

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Uncertainty, prospectus content, and the pricing of initial public offerings

Cited by 6 publications

References 47 publications

Oil Price Uncertainty and IPOs

Oil Price Uncertainty and IPOs

Role of due diligence in business takeover

IPO underpricing: a comparative analysis of risk factor disclosures in the financial and non-financial sectors

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