Abstract
I find that U.S. IPO prospectus disclosure exhibits significant correlation with first day underpricing, consistent with theories of underpricing as caused by informational asymmetry. In particular, a 1 standard deviation increase in positive prospectus disclosure is associated with almost a third reduction in first day underpricing. More disclosure also has a significant positive relation to measures of informational completeness. Further, I show that the amount of disclosure may derive from litigation risk. Controlling for measures of litigation risk, more disclosure exhibits a significant and positive relation to IPO litigation, while absent controls the relation is negative – suggesting that the amount of disclosure responds to ex ante perceived risk of litigation.
Disciplines
Corporation and Enterprise Law | Economics | Law and Economics | Securities Law
Date of this Version
April 2009
Recommended Citation
James C. Spindler, "IPO Underpricing, Disclosure, and Litigation Risk" (April 2009). University of Southern California Law and Economics Working Paper Series. Working Paper 94.
http://law.bepress.com/usclwps-lewps/art94
Included in
Corporation and Enterprise Law Commons, Economics Commons, Law and Economics Commons, Securities Law Commons