Abstract

http://ssrn.com/abstract=956099
 
 

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


Andrew J. Leone


University of Miami

Steve Rock


University of Colorado at Boulder - Department of Accounting

Michael Willenborg


University of Connecticut - Department of Accounting


Journal of Accounting Research, March 2007

Abstract:     
We use the context of a company's 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).

Keywords: DIsclosure, Underpricing, IPO, Use of Proceeds

JEL Classification: M41, M45, G12, G24, G32

Accepted Paper Series


Not Available For Download

Date posted: January 11, 2007  

Suggested Citation

Leone, Andrew J. and Rock, Steve and Willenborg, Michael, Disclosure of Intended Use of Proceeds and Underpricing in Initial Public Offerings. Journal of Accounting Research, March 2007 . Available at SSRN: http://ssrn.com/abstract=956099

Contact Information

Andrew J. Leone
University of Miami ( email )
School of Business
Coral Gables, FL 33146
United States
305-284-3101 (Phone)
HOME PAGE: http://sbaleone.bus.miami.edu
Steven Karl Rock
University of Colorado at Boulder - Department of Accounting ( email )
419 UCB
Boulder, CO 80309-0419
United States
303-735-5009 (Phone)
303-492-5962 (Fax)
Michael Willenborg (Contact Author)
University of Connecticut - Department of Accounting ( email )
School of Business
Storrs, CT 06269
United States
860-486-3020 (Phone)
860-486-4838 (Fax)
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