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Is there useful information in the ‘use of proceeds’ disclosures in IPO prospectuses?

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  • Anne Wyatt
  • Steven Cahan

Abstract

type="main" xml:id="acfi12013-abs-0001"> This study contributes evidence on the valuation relevance of the ‘use of proceeds’ disclosure in the initial public offering (IPO) prospectus. This article develops a classification of ‘use of proceeds’ disclosures that aims to capture information embedded in the disclosures relating to the purpose (growth, production, financing) and amount committed to specific assets. These measures are then related to IPO underpricing, survival prediction and expected and realised prospects of the IPOs. The results suggest the ‘use of proceeds’ disclosure categories have incremental information over other sources of information for underpricing, for predicting firm survival and in the case of some disclosure categories, for investors’ evaluation of the firms’ prospects and risks in the early years after listing.

Suggested Citation

  • Anne Wyatt & Steven Cahan, 2014. "Is there useful information in the ‘use of proceeds’ disclosures in IPO prospectuses?," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 54(2), pages 625-667, June.
  • Handle: RePEc:bla:acctfi:v:54:y:2014:i:2:p:625-667
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    File URL: http://hdl.handle.net/10.1111/acfi.2014.54.issue-2
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    Cited by:

    1. Fouad Jamaani & Manal Alidarous, 2023. "Does the appointment of the three musketeers reduce IPO underpricing? global evidence," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 13(4), pages 887-929, December.
    2. Chalmers, Keryn & Haman, Janto & Qu, Wen, 2014. "China’s Securities reforms and IPO wealth loss," Journal of Contemporary Accounting and Economics, Elsevier, vol. 10(3), pages 161-175.
    3. Kelvin Jui Keng Tan & Jia Min Lee & Robert W. Faff & Kathy Walsh, 2016. "Short-selling pressure and last-resort debt finance: evidence from 144A high-yield risk-adjusted debt," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 56(4), pages 1149-1185, December.
    4. Andriansyah, Andriansyah & Messinis, George, 2016. "Intended use of IPO proceeds and firm performance: A quantile regression approach," Pacific-Basin Finance Journal, Elsevier, vol. 36(C), pages 14-30.
    5. Fan, Pengda, 2019. "Debt retirement at IPO and firm growth," Journal of Economics and Business, Elsevier, vol. 101(C), pages 1-16.

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