Disclosure of Intended Use of Proceeds and Underpricing in Initial Public Offerings

Andrew J. Leone, Steve Rock and Michael Willenborg

Journal of Accounting Research, 2007, vol. 45, issue 1, pages 111-153

Abstract: We use the context of a company's initial public offering (IPO) of equity securities as a capital-markets setting to empirically study the economic consequences of endogenous disclosure. In particular, we examine the relation between the extent of dollar detail an IPO issuer provides regarding their intended use of proceeds and first-day underpricing. We document substantial variation in the specificity of this disclosure and find that an increase in such specificity is associated with lower IPO underpricing. Overall, our results suggest that IPOs that provide specific use-of-proceeds disclosures have less ex ante uncertainty, in the sense that these disclosures help investors estimate the dispersion of secondary market values. Our paper contributes to the empirical accounting literature by documenting an association between voluntary disclosure and what is arguably the foremost cost of raising initial equity capital (i.e., IPO underpricing). Copyright University of Chicago on behalf of the Institute of Professional Accounting, 2007.

Downloads: (external link)
http://www.blackwell ... &year=2007&part=null link to full text (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0021-8456

Access Statistics for this article

Journal of Accounting Research is edited by Ray Ball, Philip G. Berger, Merle Erickson, Richard Leftwich, Douglas J. Skinner and Abbie Smith

More articles in Journal of Accounting Research from Blackwell Publishing
Series data maintained by Christopher F. Baum ().