Voluntary Disclosure with Informed Trading in the IPO Market
PRAVEEN KUMAR, NISAN LANGBERG, K. SIVARAMAKRISHNAN
Journal of Accounting Research · 2016 · Volume 54 · Issue 5
Abstract
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 ismoreforthcoming—and investment efficiency islower—when a greater fraction of the investment community isalreadyinformed. 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.
Keywords
G14, G23, G32, IPO markets, real investment, underpricing, private information, informed trading
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