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IPO first-day returns, offer price revisions, volatility, and form S-1 language

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  • Loughran, Tim
  • McDonald, Bill
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    Abstract

    Form S-1 is the first SEC filing in the initial public offering (IPO) process. The tone of the S-1, in terms of its definitiveness in characterizing the firm’s business strategy and operations, should affect investors’ ability to value the IPO. We find that IPOs with high levels of uncertain text have higher first-day returns, absolute offer price revisions, and subsequent volatility. Our findings provide empirical evidence for the theoretical models of uncertainty, bookbuilding, and prospect theory.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Financial Economics.

    Volume (Year): 109 (2013)
    Issue (Month): 2 ()
    Pages: 307-326

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    Handle: RePEc:eee:jfinec:v:109:y:2013:i:2:p:307-326

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    Web page: http://www.elsevier.com/locate/inca/505576

    Related research

    Keywords: IPOs; First-day returns; Bookbuilding; S-1 filings; Textual analysis;

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    References

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    Cited by:
    1. Zhi Da & Ravi Jagannathan & Jianfeng Shen, 2012. "Building Castles in the Air: Evidence from Industry IPO Waves," NBER Working Papers 18555, National Bureau of Economic Research, Inc.
    2. Tim Loughran & Bill McDonald, 2014. "Regulation and financial disclosure: The impact of plain English," Journal of Regulatory Economics, Springer, vol. 45(1), pages 94-113, February.

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