Information Revelation Through Regulatory Process: Interactions between the SEC and Companies Ahead of the IPO
67 Pages Posted: 2 Jul 2016 Last revised: 16 Jun 2018
Date Written: June 7, 2018
We investigate the SEC’s role in the critical period of just before firms go public. Regulators play an active role around this time. Combining KL-divergence and LDA-analysis enables us to evaluate the regulator’s input relative to the company’s initial disclosures. The intensity of SEC review causes costly delays in companies going public but also more information to be revealed to investors, with increased disclosures relating closely to SEC concerns. Questions about revenue recognition are most informative about company valuation. However, the SEC’s policy of not releasing its concerns until after the IPO may reduce the benefits of its information production.
Keywords: Regulation, IPO, Disclosure
JEL Classification: G30, G24, G28
Suggested Citation: Suggested Citation