Author : Sudipta Basu
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (13 download)
Book Synopsis Economic Determinants and Consequences of the Proactive Disclosure of Internal Control Weaknesses and Remediation Progress in IPO. by : Sudipta Basu
Download or read book Economic Determinants and Consequences of the Proactive Disclosure of Internal Control Weaknesses and Remediation Progress in IPO. written by Sudipta Basu and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This study investigates (a) why some IPO firms proactively disclose internal control weaknesses (ICWs) and remediation progress in their prospectuses before going public, despite being exempt from the requirements of Sections 302 and 404 of the Sarbanes-Oxley Act at the time of IPO, and (b) the association of such disclosures with IPO underpricing (i.e., the first-day return). We find that IPO firms that proactively disclose ICWs and remediation progress have higher litigation risk, are audited by industry specialist auditors, and are more likely to have audit committees prior to the IPO, compared with firms that do not disclose such information, after controlling for the ex-ante probability of having ICWs. IPO underpricing is lower for firms that disclose ICWs and remediation progress, consistent with the conjecture that the disclosure of ICWs and remediation progress signals extensive premarket due diligence, thus reducing the information asymmetry between informed and uninformed investors.
