Disclosure and lawsuits ahead of IPOs

The Accounting Review

52 Pages Posted: 30 Mar 2020 Last revised: 18 Jul 2022

See all articles by Burcu Esmer

Burcu Esmer

University of Pennsylvania - The Wharton School

N. Bugra Ozel

University of Texas at Dallas

Suhas A. Sridharan

Emory University - Goizueta Business School

Date Written: July 1, 2022

Abstract

We examine whether IPO registration disclosures expose firms to greater nonshareholder litigation risk. Using hand-collected data on lawsuits initiated at federal and state courts against IPO firms, we show that firms that submit their IPO registration statement with the SEC publicly experience a 16% increase in litigation risk between the registration filing and issuance date. Consistent with the public filing of the registration driving this heightened litigation risk, firms that file their registration confidentially under the JOBS Act do not experience such an increase in litigation risk. The effects of confidential filing are concentrated among business-initiated lawsuits, intellectual property/ contract lawsuits, and potentially meritless lawsuits. We find no disproportionate increase in post-IPO lawsuits for confidential filers, suggesting that withholding information during the IPO registration period mitigates litigation risk.

Keywords: Corporate disclosure; nonshareholder lawsuits; initial public offerings

JEL Classification: G32, K20, K41, M41

Suggested Citation

Esmer, Burcu and Ozel, N. Bugra and Sridharan, Suhas A., Disclosure and lawsuits ahead of IPOs (July 1, 2022). The Accounting Review, Available at SSRN: https://ssrn.com/abstract=3548863 or http://dx.doi.org/10.2139/ssrn.3548863

Burcu Esmer

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

HOME PAGE: http://https://fnce.wharton.upenn.edu/profile/_whrtn78/

N. Bugra Ozel

University of Texas at Dallas ( email )

800 W Campbell Rd
Richardson, TX 75083-0688
United States

HOME PAGE: http://sites.google.com/view/bugraozel/home

Suhas A. Sridharan (Contact Author)

Emory University - Goizueta Business School ( email )

1300 Clifton Road
Atlanta, GA 30322-2722
United States

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