Disclosure Regimes and Corporate Decisions around Initial Public Offerings ∗
نویسندگان
چکیده
This paper analyzes the impact of different disclosure regimes on corporate decisionmaking during initial public offering. Specifically, it examines how disclosure rules affect firms’ incentives to acquire forward-looking information, their disclosure practices and investment strategies. The disclosure regimes examined are Non-Disclosure, Voluntary, and Mandatory Disclosure Regimes. The analysis yields a number of insights. It shows that a Non-Disclosure Regime for management forecasts, as what’s found in the US, can impair firms’ ability to reduce information asymmetry through disclosure. By depriving firms of the opportunity to convey private information to investors, such a policy results in undervaluation of firms with profitable prospects and overvaluation of firms with poor growth potentials. Misvaluation also alters the conditions under which firms make their investment decisions. In particular, investors’ overvaluation can give firms incentives to invest in negative NPV projects. Furthermore, a non-disclosure rule reduces equity-issuing firms’ incentives to acquire valuable productive information. However, the other two disclosure regimes also have their own distortions. Both overinvestment and underinvestment can occur under the Voluntary Disclosure Regime. In addition, with the discretion to disclose, firms tend to excessively acquire information so that they can strategically use it in the later offerings. The Mandatory Disclosure Regime has the highest price efficiency, but it also imposes burden on firms to produce information to meet the disclosure requirement. Finally, a welfare analysis shows that each of the three disclosure regimes can emerge as the socially optimal regime under some conditions.
منابع مشابه
Voluntary vs
Companies making initial public offerings in Greece were obliged to include next year‟s profit in the new issue prospectuses until the regulations changed to voluntary status. This study takes advantage of these two regulatory regimes and compares the accuracy of earnings forecasts under both mandatory and voluntary disclosure environments. Findings indicate behavioural change, as pessimistic e...
متن کاملThe Impact of Audit Quality on Earnings Management: An Experimental Study with Evidence from IPO
According to a method of earnings management activities that administrators can manage reported earnings from the definition of real activity. In particular they can be located across time and activities in a way that accounting period to achieve a certain revenue target. Conservative attitudes of auditors in presenting their views about the independence of the auditor can considered as a remar...
متن کاملGoing Public : Why ? ... and When ? Evidence from UK
Using a sample of 204 UK initial public offerings (IPOs), we empirically analyze the motive for and the timing of IPO decision by examining the determinants of IPO structure. Linked to IPO structure, the determinants of underpricing and the pattern of seasoned equity offerings (SEOs) are also investigated. The data reveal that younger and smaller firms tend to go public primarily for financing ...
متن کاملI-14: The Impact of Disclosure Decisions on Donor Gamete Participants: Donors, Intended Parents and Offspring
To discuss the psychological impact of disclosure decisions on donor gamete participants including gamete donors, intended parents, and the children conceived through these third party reproductive techniques. In the past decade, there has been a dramatic increase worldwide in the number of children born as a result of gamete donation. The growing demand for these programs has resulted in a tre...
متن کاملIncentives and Governance in Entrepreneurial Firms*
This paper analyzes corporate governance decisions at firms making initial public offerings (IPOs) of common stock between 1996 and 1999. Our objective is to examine relationships between firms corporate governance practices and the quality and availability of accountingand market-based measures of firm performance. We collect a sample of 464 companies from the manufacturing, internet, and tec...
متن کامل