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

Andrew Leone (), Steve Rock and Michael Willenborg

Journal of Accounting Research, 2007, vol. 45, issue 1, 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).

Date: 2007
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (85)

Downloads: (external link)
https://doi.org/10.1111/j.1475-679X.2006.00229.x

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

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:joares:v:45:y:2007:i:1:p:111-153

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 currently edited by Philip G. Berger, Luzi Hail, Christian Leuz, Haresh Sapra, Douglas J. Skinner, Rodrigo Verdi and Regina Wittenberg Moerman

More articles in Journal of Accounting Research from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().