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    Going concern opinions and IPO pricing accuracy

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    Publication type
    Journal article
    Author
    Matanova, Natalia
    Steigner, Tanja
    Yi, Bingsheng
    Zheng, Qiancheng
    Publication Year
    2019
    Journal
    Review of Quantitative Finance and Accounting
    Publication Volume
    53
    Publication Begin page
    195
    Publication End page
    238
    
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    Abstract
    In a marked shift, it has become relatively more common for ordinary initial public offerings (IPOs) to contain going concern opinions (GCOs) in their offering documents. Examining the implications of such GCOs for IPO investors in a sample of ordinary IPOs from 2001 to 2012, we find that GCOs increase price accuracy by reducing price revisions and underpricing. Further, we show that GCO IPOs with reputable underwriters experience higher price revisions. Our underpricing analysis supports the lawsuit avoidance theory. We also provide novel evidence that the market can distinguish between temporarily constrained GCO IPOs and those with persistent problems that receive a second GCO post-IPO. Overall, this paper contributes to the existing literature by shedding light on whether GCOs contained in IPO prospectuses provide material information and result in better pricing mechanisms.
    Keyword
    IPOs
    Knowledge Domain/Industry
    Accounting & Finance
    DOI
    10.1007/s11156-018-0747-0
    URI
    http://hdl.handle.net/20.500.12127/6582
    ae974a485f413a2113503eed53cd6c53
    10.1007/s11156-018-0747-0
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