Community Social Capital, Managerial Opportunistic Behavior, and Information Uncertainty in IPO Firms

Journal of Financial Research, Forthcoming

61 Pages Posted: 24 Apr 2024

See all articles by Shunyao (Cynthia) Jin

Shunyao (Cynthia) Jin

University of Michigan - Dearborn, College of Business

Hei Wai Lee

University of Michigan at Dearborn - School of Management

Date Written: January 2, 2024

Abstract

We examine whether and how community social capital influences the information uncertainty of a private firm’s going public process. We find that high social capital of the U.S. counties in which IPO firms are headquartered significantly reduces underpricing and post-IPO stock volatility. This relation is stronger under lessened disclosure requirements and less reputable underwriting. Further findings suggest that high social capital constrains IPO issuers from practicing opportunistic financial reporting. We document that high social capital is associated with more readable prospectus, less financial misconduct, more readable annual reports, and better long-run stock return performance in the years following the IPOs.

Keywords: Community social capital, information uncertainty, underpricing, volatility, S-1 filings, financial reporting quality

JEL Classification: A13, G34, M48

Suggested Citation

Jin, Shunyao (Cynthia) and Lee, Hei Wai, Community Social Capital, Managerial Opportunistic Behavior, and Information Uncertainty in IPO Firms (January 2, 2024). Journal of Financial Research, Forthcoming, Available at SSRN: https://ssrn.com/abstract=4795057

Shunyao (Cynthia) Jin (Contact Author)

University of Michigan - Dearborn, College of Business ( email )

Fairlane Center South
19000 Hubbard Drive
Dearborn, MI 48126-2683
United States

Hei Wai Lee

University of Michigan at Dearborn - School of Management ( email )

4901 Evergreen Road
Dearborn, MI 48128-1491
United States
313-593-5524 (Phone)
313-593-5636 (Fax)

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