Redacting proprietary information at the initial public offering

Audra L. Boone, Ioannis V. Floros and Shane A. Johnson

Journal of Financial Economics, 2016, vol. 120, issue 1, 102-123

Abstract: Nearly 40% of IPO firms redact information from their SEC registration filings. These firms exhibit characteristics consistent with the need to shield proprietary information from potential rivals. They experience greater underpricing, but pre-IPO insiders reduce underpricing-related wealth transfers by selling proportionately less of the firm's shares at the IPO, raising more equity financing in later seasoned equity offerings, and selling their own holdings at a relatively slow pace. The information environment of redacting firms reflects proportionately more private information than that of non-redacting firms post-IPO, but this difference abates by the fourth year. Consistent with the view that redacted proprietary information provides competitive advantages, redacting firms exhibit superior financial performance post-IPO. The results illustrate tradeoffs in balancing a firm's needs to protect proprietary information with its capital needs, investor needs for information to price securities, and pre-IPO owner liquidity needs.

Keywords: IPO; Product markets; Underpricing; Proprietary information; Information asymmetry; Disclosure (search for similar items in EconPapers)
JEL-codes: G24 G32 G34 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (37)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304405X16000350
Full text for ScienceDirect subscribers only

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:eee:jfinec:v:120:y:2016:i:1:p:102-123

DOI: 10.1016/j.jfineco.2015.06.016

Access Statistics for this article

Journal of Financial Economics is currently edited by G. William Schwert

More articles in Journal of Financial Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().