39 Pages Posted: 29 Apr 2009 Last revised: 12 Nov 2013
Date Written: May 13, 2009
I find that U.S. IPO prospectus disclosure exhibits significant correlation with first day underpricing, consistent with theories of underpricing as caused by informational asymmetry. In particular, a 1 standard deviation increase in positive prospectus disclosure is associated with almost a third reduction in first day underpricing. More disclosure also has a significant positive relation to measures of informational completeness. Further, I show that the amount of disclosure may derive from litigation risk. Controlling for measures of litigation risk, more disclosure exhibits a significant and positive relation to IPO litigation, while absent controls the relation is negative – suggesting that the amount of disclosure responds to ex ante perceived risk of litigation.
Suggested Citation: Suggested Citation
Spindler, James C., IPO Underpricing, Disclosure, and Litigation Risk (May 13, 2009). USC CLEO Research Paper No. C09-9; USC Law Legal Studies Paper No. 09-10; CELS 2009 4th Annual Conference on Empirical Legal Studies Paper. Available at SSRN: https://ssrn.com/abstract=1396818 or http://dx.doi.org/10.2139/ssrn.1396818