The Use of Discretion in Reporting Public Float

Abstract:     
This paper investigates how firms use discretion in reporting public float, in the context of Sox Section 404. I find that some non-accelerated filers try to delay compliance by underreporting public float to stay below the $75 million threshold. They are less likely to do so after becoming accelerated filers. Using a cost-benefit analysis, I find that firms with high expected compliance costs are more likely to underreport to keep their filing status. Those with new financing need or becoming merger targets are less likely to underreport because they benefit from lower costs of capital and information risk from compliance.

Number of Pages in PDF File: 59

Keywords: SOX, Section 404, Public Float, Form S-3, Security Registration

JEL Classification: G18, K22, M41, M4

working papers series