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The Information Content of IPO Prospectuses

Kathleen Weiss Hanley

University of Maryland

Gerard Hoberg

University of Southern California - FBE Dept

October 15, 2009

Review of Financial Studies, Vol. 23, p. 2821-2864, 2010
AFA 2010 Atlanta Meetings Paper

Using word content analysis, we decompose information in the IPO prospectus into its standard and informative components. Greater informative content, as a proxy for pre-market due diligence, results in more accurate offer prices and less underpricing because it decreases the issuing firm’s reliance on bookbuilding to price the issue. The opposite is true for standard content. Greater content from high reputation underwriters and issuing firm managers, through Management’s Discussion and Analysis, contribute to the informativeness of the prospectus. Our results suggest that pre-market due diligence and disclosure by underwriters and issuers can serve as a substitute for costly bookbuilding.

Number of Pages in PDF File: 54

Keywords: IPOs, Disclosure, Underpricing, Initial Public Offerings, Book Building, Due Diligence, Equity Offerings

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Date posted: January 15, 2009 ; Last revised: January 22, 2012

Suggested Citation

Hanley , Kathleen Weiss and Hoberg, Gerard, The Information Content of IPO Prospectuses (October 15, 2009). Review of Financial Studies, Vol. 23, p. 2821-2864, 2010; AFA 2010 Atlanta Meetings Paper. Available at SSRN: http://ssrn.com/abstract=1327171

Contact Information

Kathleen Weiss Hanley (Contact Author)
University of Maryland ( email )
College Park, MD 20742
United States
Gerard Hoberg
University of Southern California - FBE Dept ( email )
Marshall School of Business
Los Angeles, CA 90089
United States
HOME PAGE: http://www-bcf.usc.edu/~hoberg/
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