Enemy at the Gates: IPOs and Peer Firms’ Voluntary Disclosure

54 Pages Posted: 10 Apr 2023

See all articles by Xiaoxu Ling

Xiaoxu Ling

Hong Kong Polytechnic University - School of Accounting and Finance

Ivy Zhang

University of California, Riverside

Yong Zhang

Hong Kong Polytechnic University

Date Written: February 14, 2023

Abstract

We examine the impact of completed IPOs on industry peers’ voluntary disclosure. Prior research suggests that IPO issuers pose greater competitive threat through improved financing capability and risk tolerance. We expect peer firms to respond by reducing their information disclosure. Employing a difference-in-differences specification that uses withdrawn IPOs as benchmarks, we find a significant decrease in the likelihood and frequency of public incumbents’ management guidance around IPO completion in their industries. The results are robust to using NASDAQ fluctuations as an instrument for IPO completion. The effect is more pronounced when IPOs are large or successful, when peers are financially constrained, and when peers and issuers are strategic substitutes. Additional analyses find decreases in the flow of industry-level information and the decision-usefulness of peer stock prices post-IPO-completion. Overall, we provide new evidence on the disclosure response of public incumbents to completed IPOs and the resulting changes in the information environment.

Keywords: Initial public offerings, Voluntary disclosure, Competition, Information environment

Suggested Citation

Ling, Xiaoxu and Zhang, Ivy and Zhang, Yong, Enemy at the Gates: IPOs and Peer Firms’ Voluntary Disclosure (February 14, 2023). Available at SSRN: https://ssrn.com/abstract=4402606 or http://dx.doi.org/10.2139/ssrn.4402606

Xiaoxu Ling

Hong Kong Polytechnic University - School of Accounting and Finance ( email )

Hung Hom
Kowloon
Hong Kong

Ivy Zhang

University of California, Riverside ( email )

900 University Ave
Riverside, CA 92521
United States

Yong Zhang (Contact Author)

Hong Kong Polytechnic University ( email )

Hung Hom
Hung Hom
Kowloon, AK HK HK
Hong Kong

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