Abstract

https://ssrn.com/abstract=2536004
 


 



Joining the Conversation: How Quiet Is the IPO Quiet Period?


Matthew C. Cedergren


University of Pennsylvania - Accounting Department

December 9, 2014

2015 Canadian Academic Accounting Association (CAAA) Annual Conference

Abstract:     
This study evaluates the IPO quiet period, which restricts managers' ability to publicly communicate in the weeks immediately following the IPO. I investigate the effectiveness of and compliance with the quiet period for a sample of 3,380 IPOs from 1996 through 2011, and report several key findings. Firms significantly increase their communication immediately after the quiet period expires, and this manifests in more firm-specific information in returns. While this suggests the quiet period rules are effective on average, I find that there is non-random variation across firms in this effectiveness. In particular, the marginal effect of increased communication on firm-specific information processed by the market is greater for firms which are harder to value or receive less-than-expected attention in the aftermarket. Moreover, notwithstanding overall effectiveness, I find wide variation in the level of compliance with the quiet period, and that firms benefit from non-compliance. In particular, firms with more quiet period "loudness" obtain more analyst attention and are more likely to meet or beat future consensus forecasts. Collectively, the results suggest that [1] the quiet period rules prevent investors from learning useful information in a timely manner, and [2] a lack of SEC enforcement provides advantages to firms that violate the spirit, if not the letter, of the rules. This calls into question whether the IPO quiet period rules — essentially unchanged for over 80 years — remain relevant and useful in modern equity markets.

Number of Pages in PDF File: 66

Keywords: disclosure, quiet period, IPO, stock return synchronicity, press release, regulation

JEL Classification: M41, M48, K22, G14


Open PDF in Browser Download This Paper

Date posted: December 10, 2014  

Suggested Citation

Cedergren, Matthew C., Joining the Conversation: How Quiet Is the IPO Quiet Period? (December 9, 2014). 2015 Canadian Academic Accounting Association (CAAA) Annual Conference. Available at SSRN: https://ssrn.com/abstract=2536004 or http://dx.doi.org/10.2139/ssrn.2536004

Contact Information

Matthew C. Cedergren (Contact Author)
University of Pennsylvania - Accounting Department ( email )
3641 Locust Walk
Philadelphia, PA 19104-6365
United States

Feedback to SSRN


Paper statistics
Abstract Views: 314
Downloads: 68
Download Rank: 268,458