Information Revelation Through Regulatory Process: Interactions Between the SEC and Companies Ahead of the IPO

Michelle Lowry (), Roni Michaely and Ekaterina Volkova
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Ekaterina Volkova: University of Melbourne - Faculty of Business and Economics

No 19-47, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: The regulator plays an active role in the IPO process via its pre-IPO communications with firms, writing 3.8 comment letters per company. To evaluate the regulator’s input, we analyze these communications between the SEC and firms using LDA-analysis and KL-divergence. Main topics of SEC concerns map closely into the regulator’s stated mandate: companies increase prospectus disclosures within precise topics of SEC concern. Questions related to revenue recognition are most informative about company valuation. These concerns are not independently uncovered by investors. This dynamic process of information disclosure results in increased transparency, but at a cost of delays in going public.

Keywords: Regulation; IPO; Disclosure (search for similar items in EconPapers)
JEL-codes: G24 G28 G30 (search for similar items in EconPapers)
Pages: 67 pages
Date: 2019-09
New Economics Papers: this item is included in nep-acc and nep-ore
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp1947

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