Publication type
Journal articlePublication Year
2019Journal
Review of Quantitative Finance and AccountingPublication Volume
53Publication Begin page
195Publication End page
238
Metadata
Show full item recordAbstract
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
IPOsKnowledge Domain/Industry
Accounting & Financeae974a485f413a2113503eed53cd6c53
10.1007/s11156-018-0747-0