Going Public Privately: The Role of the Cost of Premature Disclosure in the IPO Process Open Access

Abstract

The cost of premature disclosure is an unexamined disclosure cost distinct from typical proprietary information costs and compliance costs. I examine whether and to what degree the decrease in the cost of premature disclosure brought about by the confidential filing provision of the Jumpstart Our Business Startups Act of 2012 (JOBS Act) eases the IPO process, using the effect of reduced mandatory disclosure compliance costs brought about by the reduced disclosure provisions from the JOBS Act as a benchmark. I find that the confidential filing provision leads to a 56% higher rate of IPO issuance in the public filing stage, leading to a 54% increase in total IPO issuance and a 118% increase in proceeds post-JOBS Act. Reduced disclosure provisions did not affect the IPO process. The results suggest that firms consider costs of premature disclosure to be more important than compliance costs when going public.

Table of Contents

I. Introduction 1

II. Institutional Background and Hypothesis 8

III. Sample and Data 15

IV. Country-Level Analysis 17

V. Firm-Level Analysis 24

VI. Conclusion 34

List of Tables and Figures

Table 1: Country-Level Descriptive Statistics 40

Table 2: Country-Level Tobit Regressions: IPOs with Sales below $1 Billion 41

Table 3: Country-Level Tobit Regressions: Domestic IPOs with Sales below $50 Million 42

Table 4: Country-Level Tobit Regressions: Foreign IPOs with Sales between $50 Million and $1 Billion 44

Table 5: Firm-Level Descriptive Statistics 46

Table 6: Firm-Level Logit Regression Analysis of Issuance Rates 52

Table 7: Firm-Level Logit Regression Analysis of Issuance Rates with Propensity Score-Matched Samples 53

Table 8: Firm-Level OLS Regression Analysis of Other Costs and Benefits 58

Figure 1: New Provisions Brought by the JOBS Act 63

Figure 2: DIDID Design 64

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School	Laney Graduate School
Department	Business
Degree	PhD
Submission	Dissertation
Language	English
Research Field	Business Administration, Accounting
Keyword	disclosure cost of premature disclosure compliance costs JOBS Act IPOs
Committee Chair / Thesis Advisor	Dichev, Ilia, Emory University Rajgopal, Shivaram, Emory University
Committee Members	Owens, Edward, Emory University Chava, Sudheer, Georgia Institute of Technology Green, Clifton, Emory University

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