Ipo Underpricing and Information Quality of Prospectuses

Zhou, Kuo; Zhou, Baicheng; Liu, Huaxiao

doi:10.1142/s0217590820500289

Cited by 6 publications

(9 citation statements)

References 35 publications

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“…Since then, several studies focusing on various aspects of underpricing demonstrate that shareholders earn listing day positive returns on the day of listing due to deliberate efforts of the issuers. The findings of contemporary research studies (Agustina and Clara, 2021;Anand and Singh, 2019;Arora and Singh, 2021;Bottazzi et al, 2016;Chhabra et al, 2017;Darmadi and Gonawan, 2013;Handa and Singh, 2015;Hanley and Hoberg, 2008;Leone et al, 2007;Liu and Zhou, 2020;Malachowski and Gadowska-dos Santos, 2021;Xu et al, 2017;Zhou et al, 2020) presents results similar to that of earlier studies (Baron, 1982;Baron and Holstroms, 1980;Chalk and Peavy, 1987;Ritter, 1984). The studies show a considerable presence of underpricing and its relationship with earnings underperformance, stock underperformance, corporate governance, IPO grading, prospectus quality and corporate disclosure.…”

Section: Empirical Literature Review and Hypothesis Development 41 Li...supporting

confidence: 72%

Earnings management and listing day performance of IPOs in India

Mangala

Dhanda

2021

JAEE

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PurposeThe purpose of this study is to examine the influence of earnings management during initial public offerings on the listing day returns.Design/methodology/approachThe study collected data for 511 Indian IPOs that came between April 2003 and March 2019 for calculating earnings management. On the basis of the Cross Sectional Modified Jones Model 1995, the paper presents three proxies of earnings management as discretionary accruals (DA), discretionary current accruals (DCA) and discretionary long-term accruals (DLA). The study further used correlation and multiple regression analysis to assess the impact of earnings management on listing day returns.FindingsThe findings show that earnings management and listing day returns vary through issue-year and industry-type. Apart from it, the study reveals a greater contribution of short-term accruals in earnings management on the basis of higher DCA values. It also discloses that the aggregate level of earnings management (DA) influences listing returns, whereas DCA and DLA separately have no impact on the listing day returns of the Indian IPOs.Research limitations/implicationsThe findings are useful to potential investors and analysts to observe, assess and understand the quality of financial reports that are based on fallacious disclosure of accounting figures. The study also reflects the efficacy of Indian regulatory norms for IPOs in constraining earnings management and underpricing, thus providing meaningful insight to the policy makers and the regulators.Originality/valueThis study is distinguished by its focus on determining the influence of earnings management on listing day returns in Indian IPOs by using three earnings management proxies.

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Section: Empirical Literature Review and Hypothesis Development 41 Li...supporting

confidence: 72%

Earnings management and listing day performance of IPOs in India

Mangala

Dhanda

2021

JAEE

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“…This reduces their understanding and ability to evaluate the corporate's prospects based on the information and can impair their decision‐making (Bonsall et al, 2017; Tan et al, 2015). More readable disclosure decreases individuals' information extraction costs (Blankespoor et al, 2020), IPO underpricing (Zhou et al, 2020), analyst forecast dispersion (Lehavy et al, 2011), stock price crash risk (Kim et al, 2019), and uncertainty (Guay et al, 2016), making capital markets more stable.…”

Section: Hypothesis Developmentmentioning

confidence: 99%

“…Previous studies have utilized content analysis to assess the quality of environmental disclosure or to categorize its content (Aboagye‐Otchere et al, 2020; Clarkson et al, 2008; Jiang et al, 2020; Xie et al, 2019), but there has been little research on its textual features, especially readability. The literature has focused exclusively on the readability of mandatory disclosure such as IPO prospectuses (Zhou et al, 2020) and 10‐Ks (Hasan, 2020; Kim et al, 2019; Loughran & McDonald, 2014), little is known about CED. The text feature measurement formulas proposed for different corpora have their applicable limitations, and previous methods based on financial text in the accounting field are not suitable for environmental text, which means existing readability formulas cannot be simply applied.…”

Section: Introductionmentioning

confidence: 99%

Enhancing sustainable development through effective disclosure: Corporate environmental performance and readability

Zhou,

Jin,

et al. 2023

Corp Soc Responsibility Env

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Although previous studies have explored the effect of corporate environmental performance on the content of environmental disclosure, little research has investigated its impact on the textual characteristics of environmental disclosure, particularly readability. This study constructs three measures of corporate environmental disclosure (CED) readability and examines the effect of corporate environmental performance on it. Using panel data from Chinese listed firms in heavy pollution industries during the period from 2008 to 2019, we find a robust positive association between corporate environmental performance and CED readability. Furthermore, we find that this association is stronger in firms with worse earning performance, stricter regional environmental regulation, or more media attention. Our analyses also reveal a positive association between CED readability and stock price crash risk. Overall, our study contributes to the research on corporate environmental performance and environmental disclosure readability and has important implications for optimizing the regulations of environmental disclosure. Our study contributes to the literature on corporate environmental performance and environmental disclosure and also provides important theoretical and practical implications for improving corporate environmental disclosure regulation.

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“…Power distance is defined as the extent to inequity (Hofstede & Bond, 1984). In higher power-distance markets with a higher degree of information asymmetry, different access to information causes more conflicts among informed and noise traders, which induces them to request higher stocks returns with speculation (Greenwood & Jovanovic, 1990;Zhou et al, 2020). Uncertainty avoidance is defined as the degree of risk aversion (Hofstede & Bond, 1984).…”

Section: The Relationship Of Cultural Values With Ipo Underpricingmentioning

confidence: 99%

Cultural Values, Economic Growth, and International Ipo Underpricing: Evidence From Chinese Companies

Geng

Tan

2021

Journal of Business Economics and Management

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Listing markets have different cultural backgrounds and experience different economic development. This study examines the impact of cultural values and the moderating effect of economic growth on IPO underpricing issued by Chinese companies in different stock markets. Using a sample of 2429 IPOs issuing in four different stock markets for the 2000–2018 period, the results suggest that in markets with higher power distance or longer-term orientation, IPOs experience higher underpricing; in markets with higher uncertainty avoidance scores, masculinity, individualism, or indulgence, IPOs experience lower underpricing. The greater the multidimensional cultural distance is to the Chinese A-share market, the less underpricing IPOs experience. Economic growth has a significant moderating effect, thereby intensifying or restraining the relationship between culture and IPO underpricing. The additional analysis considering cross-listing companies, and the robustness tests considering alternative measures of culture further support the above conclusions. This study highlights the cultural and economic factors motivating IPO underpricing, can help managers select listing markets from cultural and economic perspective.

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Ipo Underpricing and Information Quality of Prospectuses

Cited by 6 publications

References 35 publications

Earnings management and listing day performance of IPOs in India

Earnings management and listing day performance of IPOs in India

Enhancing sustainable development through effective disclosure: Corporate environmental performance and readability

Cultural Values, Economic Growth, and International Ipo Underpricing: Evidence From Chinese Companies

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