Does Disclosure Regulation Work? Evidence from International IPO Markets

62 Pages Posted: 14 Jan 2012

See all articles by Charles Shi

Charles Shi

NUS Business School, National University of Singapore

Kuntara Pukthuanthong

University of Missouri, Columbia

Thomas John Walker

Concordia University, Quebec - Department of Finance

Date Written: January 13, 2012

Abstract

This study examines whether IPO disclosure requirements mandated by countries’ securities laws are associated with variation in IPO underpricing in international IPO markets. Our empirical analysis uses a unique sample of 6,025 IPOs from 34 countries over the period from 1995 to 2002. We show for the first time that the stringency of disclosure requirements for IPO prospectuses is negatively associated with the extent of IPO underpricing, after controlling for various country- and firm-level determinants of underpricing. Moreover, we find that the disclosure effect on IPO underpricing is moderated by the extent of a country’s capital market integration. Taken together, our findings are consistent with the view that increased disclosure regulation appears to reduce IPO underpricing and hence the cost of equity, and that institutional factors such as capital market integration play an important role in understanding the economic consequences of disclosure regulation in international IPO markets.

Keywords: Disclosure Regulation, Mandatory Disclosure, Information Asymmetry, International IPO Underpricing

JEL Classification: G12, G14, K22, M41

Suggested Citation

Shi, Charles and Pukthuanthong, Kuntara and Walker, Thomas John, Does Disclosure Regulation Work? Evidence from International IPO Markets (January 13, 2012). Contemporary Accounting Research, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1984894

Charles Shi (Contact Author)

NUS Business School, National University of Singapore ( email )

15 Kent Ridge Dr
Singapore, 119245
Singapore
65-65161678 (Phone)

HOME PAGE: http://bschool.nus.edu/Accounting/FacultyStaff/Facultymembers.aspx

Kuntara Pukthuanthong

University of Missouri, Columbia ( email )

Robert J. Trulaske, Sr. College of Business
403 Cornell Hall
Columbia, MO 65211
United States
6198076124 (Phone)

HOME PAGE: https://www.kuntara.net/

Thomas John Walker

Concordia University, Quebec - Department of Finance ( email )

Montreal, Quebec H3G 1M8
Canada

Do you want regular updates from SSRN on Twitter?

Paper statistics

Downloads
193
Abstract Views
1,806
rank
213,918
PlumX Metrics