Download or read book Voluntary Disclosure and Equity Offerings written by Mark H. Lang and published by . This book was released on 2012 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine corporate disclosure activity around seasoned equity offerings and its relation to stock prices. Beginning six months before the offering, our sample issuing firms dramatically increase their disclosure activity, particularly for the categories of disclosure over which firms have the most discretion. The increase is significant after controlling for the firm's current and future earnings performance and tends to be largest for firms with selling shareholders participating in the offering. However, there is no change in the frequency of forward-looking statements prior to the equity offering, something that is expressly discouraged by the securities law.Firms that maintain a consistent level of disclosure experience price increases prior to the offering and only minor price declines at the offering announcement relative to the control firms, suggesting that disclosure may have reduced the information asymmetry inherent in the offering. Firms that substantially increase their disclosure activity in the six months prior to the offering also experience price increases prior to the offering relative to the control firms, but suffer much larger price declines at the announcement of their intent to issue equity, suggesting that the disclosure increase may have been used to quot;hype the stockquot; and the market may have partially corrected for the earlier price increase. Firms that maintain a consistent disclosure level have no unusual return behavior relative to the control firms subsequent to the announcement, while the firms that quot;hypedquot; their stock continue to suffer negative returns, providing further evidence that the increased disclosure activity may have been quot;hype,quot; and suggesting that the quot;hypequot; may have been successful in lowering the firms' cost of equity capital.

Download or read book Voluntary Disclosure During Equity Offerings written by Mark H. Lang and published by . This book was released on 2012 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine corporate disclosure activity around seasoned equity offerings and its effect on stock prices. If a firm's disclosures can increase the proceeds from security issuance, either by reducing information asymmetry or by "hyping" the stock, it will enjoy a lower cost of equity capital at the issuance. Potentially offsetting this incentive, the 1933 Securities Act restricts certain disclosure activities prior to equity offerings. Beginning six months before the offering, our sample of issuing firms dramatically increase their disclosure activity relative to control firms, particularly for the categories of disclosure over which firms have the most discretion. The increase is significant after controlling for the firm's current and future earnings performance and is largest for firms with selling shareholders participating in the offering. However, there is no change in the frequency of forward-looking statements prior to the equity offering, which is expressly prohibited by the securities law. Firms that maintain a consistently high level of disclosure enjoy price increases prior to the offering and only minor price declines at the offering announcement, consistent with disclosure reducing the information asymmetry inherent in the offering. Firms that substantially increase their disclosure activity in the six months prior to the offering also enjoy price increases prior to the offering but suffer much larger price declines at the announcement of their intent to issue equity, consistent with the disclosure increase being used to "hype the stock" and the market partially correcting for the earlier price increase. Firms that maintain a consistently high disclosure level have no unusual return behavior subsequent to the announcement, while the firms that "hyped" their stock continue to suffer negative returns, reinforcing the conclusion that the increased disclosure activity was indeed "hype," but also demonstrating that the hype was successful in lowering the firms' cost of equity capital.

Download or read book Voluntary Disclosure Information Asymmetry and Insider Selling Through Secondary Equity Offerings written by Christine I. Wiedman and published by . This book was released on 1999 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the relation of voluntary disclosure of management earnings forecasts and information asymmetry to insider selling through secondary equity offerings. We hypothesize that the pattern of voluntary disclosure and level of information asymmetry prior to secondary equity offerings differs systematically based on the identity of the seller. Specifically, we predict a greater frequency of voluntary disclosure and decreased level of information asymmetry when managers sell their stock through a secondary offering. We examine this hypothesis in a cross-sectional analysis of 210 secondary equity offerings from 1984-91, using a two-stage conditional maximum likelihood simultaneous equations estimation procedure, which allows for possible endogeneity in the manger?s decision to sell stock. Consistent with our predictions, we document a significantly positive association between managerial participation and voluntary disclosure of earnings forecasts in the nine-month period prior to registration of the offering. We also document a significantly negative association between managerial participation and two proxies for information asymmetry. The findings provide evidence that managers act as if reduced information asymmetry correlates with a reduced cost of capital.

Download or read book Voluntary Disclosure and Information Asymmetry written by Nemit Shroff and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In 2005, the SEC enacted the Securities Offering Reform (Reform), which relaxes 'gun jumping' restrictions, thereby allowing firms to more freely disclose information before equity offerings. We examine the effect of the Reform on voluntary disclosure behavior before equity offerings and the associated economic consequences. We find that firms provide significantly more pre-offering disclosures after the Reform. Further, we find that these pre-offering disclosures are associated with a decrease in information asymmetry and a reduction in the cost of raising equity capital. Our findings not only inform the debate on the market effect of the Reform, but also speak to the literature on the relation between voluntary disclosure and information asymmetry by examining the effect of quasi-exogenous changes in voluntary disclosure on information asymmetry, and thus a firm's cost of capital.

Download or read book Limits to Voluntary Disclosure in Efficient Markets written by Bharat Sarath and published by . This book was released on 2000 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In competitive markets, prices offered by investors play a dual role: they must induce the firm to make truthful disclosures about its expected cash flows and they must also be efficient, i.e., equal the expected future cash flows to the buyer conditional on the disclosed information. We show that these requirements may exert opposing influences resulting in equilibrium disclosures being partial; that is, they might cause firms to reveal some, but not all of the valuation relevant information possessed by the firm. We then characterize the maximal level of information that can be elicited through efficient prices. We apply our analysis to the study of voluntary disclosures in the context of equity offerings, leases and sale of tax-loss carry-forwards and compare these to the level of currently mandated disclosures under GAAP.

Download or read book Give it to Me Straight written by John R. Busenbark and published by . This book was released on 2017 with total page 115 pages. Available in PDF, EPUB and Kindle. Book excerpt: Managers0́9 control over the timing and content of information disclosure represents a significant strategic tool which they can use at their discretion. However, extant theoretical perspectives offer incongruent arguments and incompatible predictions about when and why managers would release inside information about their firms. More specifically, agency theory and theories within competitive dynamics provide competing hypotheses about when and why managers would disclose inside information about their firms. In this study, I highlight how voluntary disclosure theory may help to coalesce these two theoretical perspectives. Voluntary disclosure theory predicts that managers will release inside information when managers perceive that the benefits outweigh the costs of doing so. Accordingly, I posit that competitive dynamics introduce the costs associated with disclosing information (i.e., proprietary costs) and that agency theory highlights the benefits associated with disclosing information. Examining the context of seasoned equity offerings (SEOs), I identify three ways managers can use information in SEO prospectuses. I hypothesize that competitive intensity increases proprietary costs that will reduce disclosure of inside information but will increase discussing the organization positively. I then hypothesize that capital market participants (e.g., security analysts and investors) may prefer managers to provide more, clearer, and positive information about the SEO and their firms. I find support for many of my hypotheses.

Download or read book Essays on the Outcomes Incentives and Regulations of Disclosure written by Joshua Alan Lee and published by . This book was released on 2014 with total page 163 pages. Available in PDF, EPUB and Kindle. Book excerpt: My dissertation examines the outcomes, incentives, and regulations surrounding the voluntary and mandatory disclosure of information by public firms. It contains three chapters. Using earnings conference calls as a prevalent setting to examine voluntary disclosure incentives and outcomes, Chapter 1 examines the market response to firms' scripting answers to questions they expect to receive during the question and answer (Q & A) session of the conference call. I hypothesize that firms script their Q & A responses when future performance is poor to avoid disclosing information that can be used in litigation against the firm or as a means of withholding bad news from investors. I develop a measure of Q & A scripting and find evidence that investors react negatively to scripted Q & A.I also find negative returns in the quarter following scripted Q & A suggesting that investors do not fully incorporate the negative signal into the stock price at the time of the conference call. Lastly, I provide evidence of a negative association between Q & A scripting and unexpected earnings for the two quarters following the conference call, suggesting that the negative reaction to scripted calls is warranted given the realization of negative future outcomes. Chapter 2 then focuses on the incentives for firms to provide disclosures prior to raising capital in seasoned equity offerings. Seasoned equity offerings involve significant information asymmetry between the firm and potential investors. Firms can reduce information asymmetry and the cost of obtaining financing by disclosing detailed plans for how the offering proceeds will be used to generate a return for investors. However, disclosure of forward-looking strategic information is costly. A policy of full disclosure can allow competitors to obtain and use proprietary information to the detriment of the firm or can preclude investors from investing in the offering if they disagree with the chosen strategy of the manager. I argue that managers are likely to disclose only if the expected benefits of disclosure outweigh the expected costs. I expect the benefits of disclosure are the lowest for high-ability managers. High-ability managers can credibly convey firm value at the offering date and enjoy lower levels of information asymmetry. Low-ability managers, on the other hand, cannot credibly convey the value of the offering resulting in high levels of information asymmetry at the time of the offering. I provide evidence that low-ability managers are more likely to disclose plans for the offering proceeds than high-ability managers to reduce information asymmetry and the cost of obtaining funds. Finally, Chapter 3 examines the effect of regulation on the disclosure and reporting decisions of banking institutions. All public firms, including banks, must register their securities with the Securities and Exchange Commission (SEC) if they meet certain thresholds. Registered firms must disclose financial information and adhere to strict reporting requirements. These firms are also subject to regulations such as the Sarbanes Oxley Act, which requires costly attestation of the adequacy of the firm's internal controls. In 2012, the Jumpstart Our Business Startups (JOBS) Act loosened the requirements for banks to register with the SEC. The JOBS Act raised the previous registration threshold of 300 shareholders of record to 1,200 shareholders of record, allowing banks with between 300 and 1,200 shareholders of record the opportunity to deregister their securities without incurring the costs of reducing their shareholders of record to be below the prior threshold. Within the first six months following the JOBS Act, 89 banks deregistered from the SEC, which is large given that only 142 banks deregistered over the ten years prior to the Act. We hypothesize that banks deregister to take advantage of private benefits of control. We find that banks deregistering after the Act have significantly lower institutional ownership, more insider trading and insider loans, and do not display significantly lower asset growth. In contrast to positive returns during pre-JOBS Act deregistration announcements, announcement returns for post-JOBS Act deregistrations are insignificant. By reducing the costs of deregistration, the Act likely allowed banks to capture private benefits while increasing the attractiveness of deregistration for higher growth banks.

Download or read book Voluntary Disclosure and Informed Trading in the IPO Market written by Praveen Kumar and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine voluntary disclosure and capital investment by an informed manager in an initial public offering (IPO) in the presence of informed and uninformed investors. We find that in equilibrium, disclosure is more forthcoming -- and investment efficiency is lower -- when a greater fraction of the investment community is already informed. Moreover, managers disclose more information when the likelihood of an information event is higher, more equity is issued, or the cost of information acquisition is lower. Investment efficiency and the expected level of underpricing are non-monotonic in the likelihood that the manager is privately informed.

Download or read book Economic Determinants and Consequences of Voluntary Disclosure of Internal Control Effectiveness written by Chong-ŭn Yi and published by . This book was released on 2008 with total page 146 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation investigates the economic determinants of firms' decisions to voluntarily disclose internal control weaknesses, and the economic consequences of such disclosures, in the context of companies' initial public offerings (IPOs) of equity securities. I find that IPO firms with greater potential litigation risk and restated pre-IPO financial statements are more likely to disclose internal control weaknesses over pre-IPO financial reporting. In addition, I find that voluntary disclosure of internal control weaknesses and the related remediation procedures is negatively associated with underpricing, indicating that ex ante uncertainty about the new issues' value is reduced. Further, IPO firms benefit from such voluntary disclosure through increased IPO proceeds. The results also suggest that the new internal control disclosure requirements under SOX sections 302 and 404 have induced IPO firms to voluntarily disclose internal control weaknesses, contributing to lower information asymmetry between IPO firms and uninformed investors.

Download or read book Disclosure of Intended Use of Proceeds and Underpricing in Initial Public Offerings written by Andrew J. Leone and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We use the context of a company's IPO of equity securities as a capital-markets setting to empirically study the economic consequences of endogenous disclosure. In particular, we examine the relation between the extent of dollar detail an IPO issuer provides regarding their intended use of proceeds and first-day underpricing. We document substantial variation in the specificity of this disclosure and find that an increase in such specificity is associated with lower IPO underpricing. Overall, our results suggest that IPOs that provide specific use-of-proceeds disclosures have less ex ante uncertainty, in the sense that these disclosures help investors estimate the dispersion of secondary market values. Our paper contributes to the empirical accounting literature by documenting an association between voluntary disclosure and what is arguably the foremost cost of raising initial equity capital (i.e., IPO underpricing).

Download or read book The Genesis of Voluntary Disclosure written by Kristian D. Allee and published by . This book was released on 2019 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate a firm's decision to initiate earnings guidance during its first year as a public company following its initial public offering (IPO), which we label “early guidance.” Using a sample of firms with IPOs between 2001 and 2010, we find that almost 60% of our IPO firms provide early guidance and that only one third of the firms that do not provide guidance during the first year subsequently decide to guide. Consistent with the importance of liquidity incentives following the IPO, we find that firms are significantly more likely to provide early guidance when their IPOs are backed by venture capital or private equity investors. Our results indicate that firms with higher IPO information quality are more likely to provide early earnings guidance. We also find that early guidance has significant implications for future disclosure choices. Firms that guide soon after the IPO are significantly more likely to guide again and to provide regular future guidance (i.e., they establish a regular guidance policy). Finally, we find evidence suggesting that the credibility of initial guidance is lower than that of subsequent guidance, and subsequent guidance credibility relates to both the length of firms' guidance history and the accuracy of their initial guidance disclosures.

Download or read book New York Codifies Broad Voluntary Disclosure Program Offering No Penalties and No Prosecution Even for Prior Fraud written by Barbara T. Kaplan and published by . This book was released on 2008 with total page 3 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Voluntary Disclosure Practices in Emerging Capital Markets written by Tarek Mohamed Hassan Abdel-Fattah and published by . This book was released on 2008 with total page 342 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Intellectual Capital Disclosure in Initial Public Offering Prospectuses written by Inderpal Singh and published by . This book was released on 2008 with total page 896 pages. Available in PDF, EPUB and Kindle. Book excerpt: Contrary to expectations corporate governance structure does not significantly negate the negative moderating influence of proprietary costs on the positive intellectual capital disclosure - ownership retention association. Finally, Paper 6 concentrates on exploring the potential influence of corporate governance structures on intellectual capital disclosure levels. Results indicate a positive (albeit minor) association between an lPO's corporate governance structure and intellectual capital disclosure.

Download or read book Shareholder Litigation Management Forecasts and Productive Decisions during the Initial Public Offerings written by Yinghua Li and published by . This book was released on 2009 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper develops a model to analyze the impact of shareholder litigation on managers' voluntary disclosure strategies in equity offerings. The major findings are as follows. First, under different economic parameters, the entrepreneur has two possible equilibrium disclosure strategies: full and partial disclosure. Of particular interest is the latter equilibrium, in which shareholder litigation can give the entrepreneur incentives to partially disclose her private information. Second, production decisions might be distorted by the entrepreneur's disclosure incentives. The full disclosure equilibrium is associated with underinvestment, while overinvestment exists in the partial disclosure equilibrium.The model is then used to examine the effect of regulatory polices on firms' disclosure incentives. It shows that relaxing the legal liability can result in more information flow to the public. However, it also leads to a higher rate of lawsuits and an increase in deadweight litigation costs.

Download or read book SEC News Digest written by United States. Securities and Exchange Commission and published by . This book was released on 1971-07 with total page 504 pages. Available in PDF, EPUB and Kindle. Book excerpt: Lists documents available from Public Reference Section, Securities and Exchange Commission.

Download or read book Voluntary Disclosure in a Multi Audience Setting written by Sanjeev Bhojraj and published by . This book was released on 2014 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate the issue of voluntary disclosure in multi-audience settings by focusing on the electric utility industry as it transitions toward deregulation. We consider three target audiences: industry regulators, capital market participants, and product market competitors. As predicted, we find that utilities tend to disclose less strategic information in jurisdictions where the stranded cost recovery issue is unresolved, consistent with incentives to appear quot;weakquot; to regulators. Further, we find that utilities whose viability in a deregulated environment is more uncertain tend to provide more disclosures, unless they face greater threat from competitors. These results are consistent with prior theoretical research on conflicting disclosure incentives to capital markets versus product markets.Key Words: Voluntary disclosure; Electric utilities; Deregulation.