Litigation risk, strategic disclosure and the underpricing of initial public offerings

被引:134
作者
Hanley, Kathleen Weiss [2 ]
Hoberg, Gerard [1 ]
机构
[1] Univ Maryland, Robert H Smith Sch Business, College Pk, MD 20742 USA
[2] US Secur & Exchange Commiss, Washington, DC 20549 USA
关键词
Litigation risk; Initial public offerings; Initial returns; Partial adjustment; Strategic disclosure; SHAREHOLDER LITIGATION; PARTIAL ADJUSTMENT; CAPITAL-MARKETS; IPO; INFORMATION; ALLOCATION; INTERMEDIATION;
D O I
10.1016/j.jfineco.2011.09.006
中图分类号
F8 [财政、金融];
学科分类号
0202 ;
摘要
Using word content analysis on the time-series of IPO prospectuses, we show that issuers tradeoff underpricing and strategic disclosure as potential hedges against litigation risk. This tradeoff explains a significant fraction of the variation in prospectus revision patterns, IPO underpricing, the partial adjustment phenomenon, and litigation outcomes. We find that strong disclosure is an effective hedge against all types of lawsuits. Underpricing, however, is an effective hedge only against Section 11 lawsuits, those lawsuits which are most damaging to the underwriter. Underwriters who fail to adequately hedge litigation risk experience economically large penalties, including loss of market share. (C) 2011 Elsevier B.V. All rights reserved.
引用
收藏
页码:235 / 254
页数:20
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