RONGBING HUANG, Kennesaw State University - Michael J. Coles College of Business
Email: rhuang1@kennesaw.edu
DONGHANG ZHANG, University of South Carolina
Email: zhang@moore.sc.edu

The number of initial public offerings (IPOs) in the U.S. has been much lower since 2000 than in the prior two decades, although there was a surge in IPO activity in 2021. The Securities and Exchange Commission (SEC) has attempted to reduce the regulatory and cost burdens of going public. Important new developments in the U.S. IPO market include confidential filings, testing the waters, direct listings, and special purpose acquisition companies (SPACs). This paper reviews these developments and related research. It aims to shed light on whether they can help capital formation and lower the costs of going public. It also explores the motives for going public, new insights into IPO pricing, institutional investors’ pre-IPO investments, and the consequences of firms’ IPO decisions.

In the U.S., the majority of IPOs have used the bookbuilding mechanism, which involves generating and recording investors’ buying interests. Different companies prefer different mechanisms for going public. Bookbuilding is valuable for companies that face uncertainty regarding investor demand. A private firm may prefer selling itself to a publicly traded acquiring firm over an IPO in order to expand more quickly by utilizing the acquirer’s capital and established platform. A high growth firm may prefer a merger with a SPAC over a traditional bookbuilt IPO due to the ability to use solid forecasts to increase the stock’s valuation. And companies with strong brand recognition or easy-to-understand business models, but no immediate cash needs, may find a direct listing more attractive, especially when their insiders have large diversification or liquidity needs. The SEC and other regulatory agencies should embrace and enhance these alternative mechanisms.

Economies-of-scope considerations, globalization, regulatory and disclosure requirements, and the relative costs of public versus private capital all play a part in firms’ decisions to go public. Careful examinations of the benefits and costs are still needed. Possible widespread use of confidential filings and testing-the-waters communications after the regulatory changes initiated by the 2012 JOBS Act can substantially influence information production, IPO decisions, and IPO pricing. Private companies have increasingly used direct listings and SPAC mergers to go public, and emerging evidence suggests these methods will continue to evolve.

Several recent papers examine IPO underpricing across countries, and their findings are consistent with both information asymmetry-based explanations and those based on issuer-underwriter conflicts. Information asymmetry helps explain the 7% average IPO underpricing in the U.S. during the 1980s. However, explanations based on agency problems, underwriter power, and issuer complacency are instructive for understanding the average underpricing of over 18% for all IPOs since then or over 50% for large subsets that can be identified ex ante. Future research would be useful to shed light on the predictability and magnitude of IPO underpricing, as well as on the effects of regulations and issuer-underwriter conflicts on underpricing.

Recent research shows that IPOs have far-reaching effects. They not only influence the financing and investment policies of the issuing companies, but also have spillover effects to other companies, local communities, and labor markets.

IVAN AMIRIAN, Independent
Email: ovam@mail.ru

Both the reverse piercing of the corporate veil and the classical doctrine of piercing the corporate veil are the phenomena that derived from the limited liability doctrine and are designed as tools that are supposed to smooth the extreme manifestations of the limited liability.
Nowadays, in academic society there is still little consensus even about the efficiency of the classical veil piercing doctrine, despite a lot of research dedicated to this issue. As for the reverse piercing of the corporate veil, this phenomenon, in comparison with the classical doctrine, turned far less frequently to be an object of research and still remains the sphere that requires thorough research and analysis on a much larger scale.
The goal of this paper is to provide a comprehensive analysis of the current state of the reverse piercing of the corporate veil.
In the first part of the article, we will attempt to define the nature of the reverse piercing and make a brief comparison of the classical veil piercing doctrine and the reverse piercing.
In the second part, we will carry out the economic analysis of the reverse piercing of the corporate veil.

MARIA BORYSOFF (NYKYFOROVYCH), George Mason University
Email: mnykyfor@gmu.edu
PAUL MASON, Baylor University
Email: P_Mason@Baylor.edu
STEVEN UTKE, University of Connecticut - Department of Accounting
Email: sutke@uconn.edu

Private equity (PE) funds are increasingly important to the economy and now dominate capital markets (e.g., capital formation). However, lack of understanding of PE funds among accounting academics prevents accounting research in this area. In this paper, we first describe the PE fund setting and explain how PE’s fundamental differences from previously studied settings make it difficult to infer PE fund behavior from research in other settings. We then discuss how PE funds provide researchers with the ability to explore fundamental questions related to agency costs, governance, compensation, disclosure, and fair value accounting. Finally, we provide guidance on PE data sources. Because of the volume of economic activity currently funneled through PE, to the extent that academic accountants seek to conduct relevant research to understand when, why, or how accounting matters, PE is not just “a” setting to explore, but “the” setting to study.

YVES HERINCKX, Herinckx SRL, Brussels Court of Appeal
Email: yves.herinckx@herinckx.be

French Abstract: Les contrats d’acquisition d’entreprises prévoient fréquemment un double mécanisme de résolution des litiges : une détermination par un expert « tiers décideur » pour la fixation du prix et une clause d’arbitrage pour tout le reste. Ce mélange des genres est efficace. L’expert et l’arbitre ont chacun leur rôle. Leurs domaines de compétence respectifs sont mutuellement exclusifs.

L’article analyse comment ces deux procédures coexistent, en droit belge et à l’aide du droit comparé, principalement en Angleterre et à New York. L’auteur examine les pouvoirs de contrôle de l’arbitre sur l’expert, et notamment les motifs d’annulation par l’arbitre de la décision de l’expert. L’étude se concentre sur les zones de conflit potentiel entre les rôles respectifs des deux intervenants : questions d’interprétation du contrat ou des normes comptables, chevauchements des motifs d’ajustement du prix et d’appel aux garanties, exercice des pouvoirs d’appréciation liées à l’établissement des comptes, calendrier, accès aux documents, etc. L’article analyse également les pouvoirs des cours et tribunaux judiciaires d’annuler les décisions de l’arbitre ou de l’expert.

English Abstract: M&A agreements often provide for two distinct dispute resolution mechanisms: expert determination for price adjustment disputes, arbitration for all other disputes. This split arrangement is effective. The expert and the arbitrator have their own respective roles and their areas of competence are mutually exclusive.

The paper looks at how both procedures interact with each other, under Belgian law and with comparative law input from New York and England in particular. The author discusses the supervisory powers that the arbitrator may exercise over the expert, including the causes for annulment by the arbitrator of the expert’s decision. The focus lies in particular on the zones of potential conflict between both actors’ tasks: issues of interpretation of the contract or of the accounting standards, overlap between grounds for price adjustment and for warranty claims, use of discretion in matters of accounting judgement, timetables, access to documents, etc. The paper also discusses the State courts’ powers, in annulment proceedings, to overrule arbitrators and experts.

JIBIN JOSE, Reserve Bank of India
Email: jibinjose0505@gmail.com
ABHINANDAN BORAD, Reserve Bank of India
Email: abhinandanborad@gmail.com

In this paper, we ask how firms’ optimal debt structure responds to a change in the bankruptcy regime. While existing work shows that this relationship is dependent on the ex-ante liquidation value of a firm, we demonstrate that the ownership of lenders they are connected to also matters. We argue this by exploiting a legislative reform that significantly increased creditor rights in India in 2016. We estimate the differential response of firms that are exclusively funded by the Public Sector Banks (“PSB firms”) to the new bankruptcy environment in terms of their borrowing decisions. Our results suggest that the high liquidation value PSB firms reduced their leverage relative to others after the reform compared to before. On the other hand, the low liquidation value PSB firms increased their leverage. We further find that the relative deleveraging amongst the former group is primarily driven by firms with low ex-ante marginal revenue product of capital (MRPK) whereas the increase observed within the latter group is due to firms with high ex-ante MRPK. Our analysis, therefore, indicates a redistribution of debt from low MRPK (less efficient) high liquidation value PSB firms to high MRPK (more efficient) low liquidation value PSB firms after the reform vis-a-vis before.

OKANGA OKANGA, Dalhousie University, Schulich School of Law
Email: okangaokanga2@gmail.com

Corporate activism – the progressive pursuit of social justice causes by corporations – is a growing global phenomenon. There are increasing expectations and, in many cases, demands that corporations pull off their gloves to actively confront sociopolitical issues bedevilling their communities. Emerging scholarship suggests that corporate activism is influenced by various factors, including the ethical, political, and commercial orientations of corporate minds and the relative political and legal landscape within which corporations operate. Adopting a qualitative research mechanism that reflects on open-source information about relevant actors, collected from blogs, Twitter, and news sites, as complemented by a broad variety of secondary sources, this interdisciplinary research explores the theoretical suppositions of corporate activism in the light of corporate intervention in Nigeria’s y