Information Disclosure and IPO Valuation: What Kinds of Information Matter and is More Information Always Better?

Babson College Entrepreneurship Research Conference (BCERC), 2008

Frontiers of Entrepreneurship Research 2008

15 Pages Posted: 5 Mar 2009

See all articles by Daeil Nam

Daeil Nam

affiliation not provided to SSRN

Jonathan D. Arthurs

Washington State University

Marsha L. Nielsen

affiliation not provided to SSRN

Fariss Mousa

affiliation not provided to SSRN

Kun Liu

Washington State University - College of Business and Economics

Date Written: February 23, 2009

Abstract

Many financial theories emphasize the positive relationship between information disclosure and firm performance. However, disclosure of information can harm a firm if others make strategic use of the information. In this paper, we test the effect of information disclosure on performance. Using a sample of all firms which went through an IPO in the U.S. during the 2001-2003 period, we examine the relationship between different types of information including 1) the specificity of information, 2) the accuracy of information, and 3) the amount of time for information diffusion and the valuation of the IPO firm. We use OLS regression to predict IPO performance including 1) underpricing, 2) percent premium and 3) 3 year cumulative average adjusted returns. Also, we check for a potential curvilinear relationship between the level of information disclosure and IPO performance. We find a negative relationship between information disclosure and underprcing but a positive relationship with percent premium. The implications of these findings and several directions for future research are discussed as well.

Keywords: Entrepreneurship

JEL Classification: M13

Suggested Citation

Nam, Daeil and Arthurs, Jonathan D. and Nielsen, Marsha L. and Mousa, Fariss and Liu, Kun, Information Disclosure and IPO Valuation: What Kinds of Information Matter and is More Information Always Better? (February 23, 2009). Babson College Entrepreneurship Research Conference (BCERC), 2008; Frontiers of Entrepreneurship Research 2008. Available at SSRN: https://ssrn.com/abstract=1348222 or http://dx.doi.org/10.2139/ssrn.1348222

Daeil Nam (Contact Author)

affiliation not provided to SSRN ( email )

Jonathan D. Arthurs

Washington State University ( email )

Wilson Rd.
College of Business
Pullman, WA 99164
United States

Marsha L. Nielsen

affiliation not provided to SSRN

No Address Available

Fariss Mousa

affiliation not provided to SSRN ( email )

Kun Liu

Washington State University - College of Business and Economics ( email )

PO Box 644750
Pullman, WA 99164-4750
United States

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