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

See all articles by Michelle Lowry

Michelle Lowry

Drexel University

Roni Michaely

University of Geneva - Geneva Finance Research Institute (GFRI); Swiss Finance Institute

Ekaterina Volkova

University of Melbourne - Faculty of Business and Economics

Date Written: June 7, 2018

Abstract

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

Lowry, Michelle B. and Michaely, Roni and Volkova, Ekaterina, Information Revelation Through Regulatory Process: Interactions between the SEC and Companies Ahead of the IPO (June 7, 2018). Fifth Annual Conference on Financial Market Regulation. Available at SSRN: https://ssrn.com/abstract=2802599 or http://dx.doi.org/10.2139/ssrn.2802599

Michelle B. Lowry (Contact Author)

Drexel University ( email )

Philadelphia, PA 19104
United States
215-895-6070 (Phone)

Roni Michaely

University of Geneva - Geneva Finance Research Institute (GFRI) ( email )

40 Boulevard du Pont d'Arve
Geneva 4, 1211
Switzerland

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Ekaterina Volkova

University of Melbourne - Faculty of Business and Economics ( email )

Victoria, 3010
Australia

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