More Lemons, More Disclosure? The JOBS Act and Voluntary IPO Disclosure of Internal Controls PDF Download
Are you looking for read ebook online? Search for your book and save it on your Kindle device, PC, phones or tablets. Download More Lemons, More Disclosure? The JOBS Act and Voluntary IPO Disclosure of Internal Controls PDF full book. Access full book title More Lemons, More Disclosure? The JOBS Act and Voluntary IPO Disclosure of Internal Controls by Emily Jing Wang. Download full books in PDF and EPUB format.
Author: Emily Jing Wang
Publisher:
ISBN:
Category :
Languages : en
Pages : 52
Get Book Here
Book Description
I examine the change in voluntary IPO disclosure of internal controls after the JOBS Act. The JOBS Act postponed the compliance deadline of internal control audits after IPO. Simultaneously, it increased the number of small IPO firms with potential control weaknesses. I find that IPO firms are more likely to disclose internal controls after the JOBS Act. Further, post-JOBS IPO firms who are willing to disclose experience lower underpricing. This lower underpricing is not fully explained by the supplemental disclosure of remediation of control weaknesses. Finally, the increased disclosure of internal controls after the JOBS Act is not associated with worse accounting quality or more intensive SEC oversight on internal control issues. Collectively, these results are consistent with a dynamic view that as investors rationally update their beliefs of increasing “lemons” in the IPO population after the JOBS Act, IPO firms become more forthcoming with internal control disclosure.
Author: Emily Jing Wang
Publisher:
ISBN:
Category :
Languages : en
Pages : 52
Get Book Here
Book Description
I examine the change in voluntary IPO disclosure of internal controls after the JOBS Act. The JOBS Act postponed the compliance deadline of internal control audits after IPO. Simultaneously, it increased the number of small IPO firms with potential control weaknesses. I find that IPO firms are more likely to disclose internal controls after the JOBS Act. Further, post-JOBS IPO firms who are willing to disclose experience lower underpricing. This lower underpricing is not fully explained by the supplemental disclosure of remediation of control weaknesses. Finally, the increased disclosure of internal controls after the JOBS Act is not associated with worse accounting quality or more intensive SEC oversight on internal control issues. Collectively, these results are consistent with a dynamic view that as investors rationally update their beliefs of increasing “lemons” in the IPO population after the JOBS Act, IPO firms become more forthcoming with internal control disclosure.
Author: Tiffany Jo Westfall
Publisher:
ISBN: 9781339663920
Category :
Languages : en
Pages : 123
Get Book Here
Book Description
This study examines registrants' incentives to disclose internal control weaknesses (ICWs) voluntarily in IPO registration statements and their post-IPO financial reporting quality. Using a sample of initial public offering (IPO) registrants from 2005-2013, I find that increasing management's disclosure credibility, by hiring a new CEO in the IPO, is an incentive to include ICWs in IPO registration statements. I find that management does build credibility with underwriters evidenced by IPO registrants that disclose ICWs voluntarily are associated with higher IPO offer prices. The results suggest that registrants including voluntary ICW disclosures are more likely to receive an adverse SOX 404 auditor opinion. I find that registrants' voluntary ICW disclosures are informative and are associated with negative cumulative abnormal returns only when an auditor issues an adverse SOX 404 auditor opinion after the disclosure. IPO registrants that voluntarily disclose ICWs and receive unqualified SOX 404 auditor opinions appear to be successful in mitigating negative cumulative abnormal returns. My findings provide evidence that misstatements appear to outpace material weakness disclosures for the sample of IPO registrants. Overall, the findings suggest that managers seek to build credibility through voluntary disclosure of ICWs at the IPO, allowing managers to maximize the rewards at the IPO date (i.e., IPO offer price). However, managers suffer punishment from investors if subsequent events (i.e., SOX 404 material weaknesses) call into question the credibility of the disclosure. The post-IPO financial reporting quality results are timely and relevant to regulators because the relationship between misstatements and unqualified audit opinions is puzzling. Additionally, the JOBS Act allows IPO registrants to delay SOX 404 compliance for up to five years. Finally, this study's results are important to investors because the purpose of SOX 404 is to provide an advanced warning of financial reporting weaknesses.
Author: Chong-ŭn Yi
Publisher:
ISBN:
Category :
Languages : en
Pages : 146
Get Book Here
Book Description
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.
Author: Ally Zimmerman
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
Get Book Here
Book Description
This paper examines early evidence of IPO registrants' disclosure exemption choices in response to the optional disclosure relief provided by the recently enacted Jumpstart Our Business Startups Act (JOBS Act) of 2012. The JOBS Act provides firms going public classified as “emerging growth companies” (EGCs) with certain accounting and financial reporting and disclosure exemptions not available to other issuers. The study's results for EGC firms filing prospectuses through August, 2013, indicate that for the earliest companies affected by the JOBS Act, greater board independence and audit committee accounting expertise are associated with greater likelihood of foregoing financial reporting exemptions. Moreover, the study finds that scaled executive compensation disclosure exemptions had widespread acceptance while the private company accounting standards and reduced audited financial statements exemption provisions were initially less utilized. Finally, the study finds that even though the JOBS Act raised the threshold for disclosure relief up to $1 billion in revenues, those firms that were already classified as smaller reporting companies which already have less extensive disclosure demands under SRC Rule #33-8876, were those most likely to initially take these exemptions. The paper discusses the practical implications of the study's findings for accounting standard-setters, watchdogs, and policy makers.
Author: Joshua Alan Lee
Publisher:
ISBN:
Category : Electronic dissertations
Languages : en
Pages : 163
Get Book Here
Book Description
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.
Author: Financial Crisis Inquiry Commission
Publisher: Cosimo, Inc.
ISBN: 1616405414
Category : Political Science
Languages : en
Pages : 692
Get Book Here
Book Description
The Financial Crisis Inquiry Report, published by the U.S. Government and the Financial Crisis Inquiry Commission in early 2011, is the official government report on the United States financial collapse and the review of major financial institutions that bankrupted and failed, or would have without help from the government. The commission and the report were implemented after Congress passed an act in 2009 to review and prevent fraudulent activity. The report details, among other things, the periods before, during, and after the crisis, what led up to it, and analyses of subprime mortgage lending, credit expansion and banking policies, the collapse of companies like Fannie Mae and Freddie Mac, and the federal bailouts of Lehman and AIG. It also discusses the aftermath of the fallout and our current state. This report should be of interest to anyone concerned about the financial situation in the U.S. and around the world.THE FINANCIAL CRISIS INQUIRY COMMISSION is an independent, bi-partisan, government-appointed panel of 10 people that was created to "examine the causes, domestic and global, of the current financial and economic crisis in the United States." It was established as part of the Fraud Enforcement and Recovery Act of 2009. The commission consisted of private citizens with expertise in economics and finance, banking, housing, market regulation, and consumer protection. They examined and reported on "the collapse of major financial institutions that failed or would have failed if not for exceptional assistance from the government."News Dissector DANNY SCHECHTER is a journalist, blogger and filmmaker. He has been reporting on economic crises since the 1980's when he was with ABC News. His film In Debt We Trust warned of the economic meltdown in 2006. He has since written three books on the subject including Plunder: Investigating Our Economic Calamity (Cosimo Books, 2008), and The Crime Of Our Time: Why Wall Street Is Not Too Big to Jail (Disinfo Books, 2011), a companion to his latest film Plunder The Crime Of Our Time. He can be reached online at www.newsdissector.com.
Author: Merritt B. Fox
Publisher:
ISBN: 9781982966850
Category : Securities
Languages : en
Pages : 476
Get Book Here
Book Description
Author: Louis Loss
Publisher: Aspen Publishers
ISBN:
Category : Business & Economics
Languages : en
Pages : 820
Get Book Here
Book Description
"The universally acknowledged work Securities Regulation is of immense day-to-day value to the practitioner. The authors' analysis of all relevant statutes plus thousands of cases, SEC administrative decisions and letters definitively clarifies such questions as: When does a note fall within the definition of a "security" How have the courts altered the express civil liability provisions of the federal securities laws? Can the SEC impose additional ten-day suspensions on trading without notice? Does scienter include reckless as well as intentional conduct? And countless others, so that you're almost sure to find coverage of the "small point" on which your case may turn."--Publisher's website.
Author: Joshua Ronen
Publisher: Springer Science & Business Media
ISBN: 0387257713
Category : Business & Economics
Languages : en
Pages : 587
Get Book Here
Book Description
This book is a study of earnings management, aimed at scholars and professionals in accounting, finance, economics, and law. The authors address research questions including: Why are earnings so important that firms feel compelled to manipulate them? What set of circumstances will induce earnings management? How will the interaction among management, boards of directors, investors, employees, suppliers, customers and regulators affect earnings management? How to design empirical research addressing earnings management? What are the limitations and strengths of current empirical models?
Author: Jonathan R. Macey
Publisher: American Enterprise Institute
ISBN: 9780844770109
Category : Business & Economics
Languages : en
Pages : 92
Get Book Here
Book Description
The book presents different perspectives that explain the prohibition of insider trading and the way it affects various aspects of life on the stock market.
