Voluntary Disclosure and Informed Trading in the IPO Market

Posted: 29 Apr 2017

See all articles by Praveen Kumar

Praveen Kumar

University of Houston - Department of Finance

Nisan Langberg

University of Houston - C.T. Bauer College of Business; Tel Aviv University - Coller School of Management

Shiva Sivaramakrishnan

Rice University

Multiple version iconThere are 2 versions of this paper

Date Written: December 1, 2016

Abstract

We examine voluntary disclosure and capital investment by an informed manager in an initial public offering (IPO) in the presence of informed and uninformed investors. We find that in equilibrium, disclosure is more forthcoming — and investment efficiency is lower — when a greater fraction of the investment community is already informed. Moreover, managers disclose more information when the likelihood of an information event is higher, more equity is issued, or the cost of information acquisition is lower. Investment efficiency and the expected level of underpricing are non-monotonic in the likelihood that the manager is privately informed.

Keywords: IPO markets, real investment, underpricing, private information, informed trading

JEL Classification: G14; G23; G32

Suggested Citation

Kumar, Praveen and Langberg, Nisan and Sivaramakrishnan, Shiva, Voluntary Disclosure and Informed Trading in the IPO Market (December 1, 2016). Journal of Accounting Research, Vol. 54, No. 5, 2016, Available at SSRN: https://ssrn.com/abstract=2960177

Praveen Kumar

University of Houston - Department of Finance ( email )

Houston, TX 77204
United States
713-743-4770 (Phone)
713-743-4789 (Fax)

Nisan Langberg (Contact Author)

University of Houston - C.T. Bauer College of Business ( email )

Houston, TX 77204-6021
United States

Tel Aviv University - Coller School of Management ( email )

Tel Aviv
Israel

Shiva Sivaramakrishnan

Rice University ( email )

6100 South Main Street
Houston, TX 77005-1892
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
941
PlumX Metrics