Pre-and-aftermarket IPO underpricing: Does use of proceeds disclosure matter?

Ranganathan, Kavitha and Veeraraghavan, Madhu (2023) Pre-and-aftermarket IPO underpricing: Does use of proceeds disclosure matter? Journal of Contemporary Accounting & Economics. pp. 1-21.

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Abstract

Exploiting a unique regulatory framework for IPO pricing in India, which allows us to estimate voluntary and aftermarket underpricing, we answer whether specific use of proceeds explains underpricing in the pre- and aftermarket. Our main findings are as follows. First, we document that disclosure of specific use of proceeds increases actual voluntary underpricing (i.e., offer price being lower) in the premarket and lowers aftermarket underpricing (i.e., the first-day closing price is lower). Second, the premarket effect is pronounced for firms with greater information asymmetry, whereas the aftermarket effect is pronounced for firms with higher investor senti�ment. Our core findings are robust to tests that mitigate endogeneity concerns. Collectively, we show that disclosure impacts underpricing differently in the pre- and aftermarket.

Item Type:	Article
Uncontrolled Keywords:	IPO underpricing Disclosure Regulation Premarket
Divisions:	Marketing Management
Depositing User:	Mr. Mahesha Havanje
Date Deposited:	16 Oct 2023 07:37
Last Modified:	11 Mar 2024 09:05
URI:	http://tapmi.informaticsglobal.com/id/eprint/795

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