The Effects of Information Disclosure and Board Independence on IPO Discount

23 Pages Posted: 31 Mar 2008

See all articles by Salim Chahine

Salim Chahine

American University of Beirut - Olayan School of Business

Igor Filatotchev

City University London - Sir John Cass Business School

Abstract

This paper examines the effect of strategic information disclosure and corporate governance on the stock market performance of initial public offering (IPO) firms in France. It argues that information disclosure and board independence mitigate agency problems between the IPO firm and investors, thus reducing the IPO discount defined as the difference between the offer price and the intrinsic value of the firm. However, extensive disclosure may damage the firm's competitive advantage and lead to a curvilinear (an inverted U-shape) relationship between information disclosure and the IPO discount. Further analysis suggests that it is not necessarily the quantity of information, but rather the type of information, that causes the IPO discount to increase with the amount of disclosure.

Suggested Citation

Chahine, Salim and Filatotchev, Igor, The Effects of Information Disclosure and Board Independence on IPO Discount. Journal of Small Business Management, Vol. 46, Issue 2, pp. 219-241, April 2008. Available at SSRN: https://ssrn.com/abstract=1113932 or http://dx.doi.org/10.1111/j.1540-627X.2008.00241.x

Salim Chahine (Contact Author)

American University of Beirut - Olayan School of Business ( email )

Bliss Street
Beirut 1107 2020
Lebanon
961-1-374-374 (Phone)

Igor Filatotchev

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

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