The emerging growth company status on IPO: Auditor Effort, Valuation, and underpricing

Westfall, Tiffany; Omer, Thomas C.

doi:10.1016/j.jaccpubpol.2018.07.003

Cited by 17 publications

(10 citation statements)

References 44 publications

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“…Following Hay et al (2006), Copley and Douthett (2009), and Westfall and Omer (2018), our proxy for IPO Accounting fees is the natural logarithm of accounting fees disclosed in the last amended S-1 registration fillings (IPO Accounting Fees). The main variable of interest is corporate political activities (CPA), which is a dummy variable that takes a value of one for IPO firms with lobbying or PAC contributions made in the election cycle most closely preceding the IPO, or that have politically connected directors, and zero otherwise.…”

Section: Empirical Modelmentioning

confidence: 99%

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Corporate political activism, information transparency and IPO compliance costs

Gounopoulos

Loukopoulos

2023

Business Fin & Account

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Due to their covert and often dubious nature, corporate political activities may encourage or facilitate opportunistic behaviors. Yet, they also subject firms to heightened visibility, which brings greater public and regulatory scrutiny. Using a hand-collected data set of politically connected U.S. IPOs, we investigate how this tension shapes the financial reporting incentives of firms going public and the accompanying direct compliance costs. Consistent with the agency view of corporate political activism (CPA), politically active IPO issuers have worse financial reporting quality, more litigation risk, and eventually pay 28% more accounting fees than their peers. Additional analysis exploiting the U.S. Supreme Court's landmark ruling on Citizens United vs. Federal Election Commission suggests that the link between CPA and IPO accounting fees is likely to be causal. Finally, our evidence indicates that the involvement of specialized financial intermediaries in the political process has implications for the IPO financial reporting quality.

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Section: Empirical Modelmentioning

confidence: 99%

“…It is well documented that regulatory compliance costs hinder the access of private firms to the primary equity market (e.g., Dambra et al, 2015;Chaplinsky et al, 2017;Westfall and Omer, 2018).…”

Section: Introductionmentioning

confidence: 99%

Corporate political activism, information transparency and IPO compliance costs

Gounopoulos

Loukopoulos

2023

Business Fin & Account

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“…According to Westfall and Omer (2018), “prior accounting research commonly uses audit fees as a proxy for auditor effort (Defond and Zhang, 2014; Simunic, 1980). ” Therefore, this line of research is followed and the following ordinary least squares (OLS) regression is applied to gauge whether auditors exert more or less effort while working with EGCs compared to non-EGCs: where LN_AF is the natural log of audit fees, EGC is a dummy variable that equals one if the company is classified as an EGC or is otherwise zero.…”

Section: Models and Resultsmentioning

confidence: 99%

“…Their findings suggest that the JOBS Act is associated with greater information uncertainty, as measured by IPO underpricing and post-IPO equity return volatility. Westfall and Omer (2018) conducted a similar study examining the association between auditor effort, IPO offer prices and investors' perception of registrants' intrinsic value. Their outcomes are consistent with Barth et al (2017), concurring that EGCs with reduced financial statements information experience more underpricing.…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

“…On the other hand, an argument can be made that auditors may exert even more effort while working with EGCs because EGCs are startups with usually an increased audit risk. Past literature provides mixed evidence; in particular, Westfall and Omer (2018) provide preliminary evidence on the effect of the Act on reducing accounting fees, while Khurana and Zhao (2019) justify the opposite. Because the objective of the Act is to decrease costs and effort related to filing and reporting activities, I expect the implementation of the Act results in decreased auditor effort, and I test the following hypothesis: H1.…”

Section: Auditor Effortmentioning

confidence: 99%

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The impact of reducing reporting requirements on audit quality, auditor effort and auditor conservatism

Elshafie

2022

ARJ

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Purpose This study aims to examine the effect of reducing disclosure and auditing requirements on audit quality, auditor effort and auditor conservatism. The Jumpstart Our Business Startups (JOBS) Act of 2012 is used as a setting for this research. The JOBS Act aimed to boost economic growth by easing emerging growth companies’ (EGCs) access to capital markets. The Act provides scaled disclosure and auditing provisions and exemptions for EGCs. Design/methodology/approach Using data from Capital IQ, CRSP and Audit Analytics on EGCs and matching non-EGCs between 2012 and 2018, this study assesses the effect of such reduced disclosure and audit requirements on audit quality, auditor effort and auditor conservatism. Findings The findings denote that while audit quality and auditor effort are lower for EGCs, auditor conservatism is not different for EGCs as compared to non-EGCs. Originality/value This study expands the current research by providing evidence on the impact of reduced reporting and auditing requirements on auditor conservatism and audit quality, in addition to auditor effort in EGC engagements.

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Does the appointment of the three musketeers reduce IPO underpricing? global evidence

Jamaani

Alidarous²

2022

Eurasian Bus Rev

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The emerging growth company status on IPO: Auditor Effort, Valuation, and underpricing

Cited by 17 publications

References 44 publications

Corporate political activism, information transparency and IPO compliance costs

Corporate political activism, information transparency and IPO compliance costs

The impact of reducing reporting requirements on audit quality, auditor effort and auditor conservatism

Does the appointment of the three musketeers reduce IPO underpricing? global evidence

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