 Pre-and-aftermarket IPO underpricing: Does use of proceeds disclosure matter?Kavitha Ranganathan and Madhu Veeraraghavan Journal of Contemporary Accounting and Economics, 2023, vol. 19, issue 3 Abstract: Exploiting a unique regulatory framework for IPO pricing in India, which allows us to estimate voluntary and aftermarket underpricing, we answer whether specific use of proceeds explains underpricing in the pre- and aftermarket. Our main findings are as follows. First, we document that disclosure of specific use of proceeds increases actual voluntary underpricing (i.e., offer price being lower) in the premarket and lowers aftermarket underpricing (i.e., the first-day closing price is lower). Second, the premarket effect is pronounced for firms with greater information asymmetry, whereas the aftermarket effect is pronounced for firms with higher investor sentiment. Our core findings are robust to tests that mitigate endogeneity concerns. Collectively, we show that disclosure impacts underpricing differently in the pre- and aftermarket. Keywords: IPO underpricing; Disclosure; Regulation; Premarket (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jocaae:v:19:y:2023:i:3:s1815566923000292 DOI: 10.1016/j.jcae.2023.100379 Access Statistics for this article Journal of Contemporary Accounting and Economics is currently edited by Agnes C.S. Cheng, P. Clarkson, F.A. Gul, Zoltan Matolcsy, Dan Simunic and Ben Srinidhi More articles in Journal of Contemporary Accounting and Economics from Elsevier |
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