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This paper examines the impact of trade secret laws on the underpricing of initial public offerings (IPOs) in the United States, where we focus on the Uniform Trade Secret Act and/or the inevitable disclosure doctrine. Given that trade secret laws help firms protect their know-how in the form of trade secrets, we propose that trade secrets protected by these laws may result in increased corporate opacity, leading to greater IPO underpricing. Empirically, the average first-day returns of IPOs in states with trade secret laws are 12.7% higher than those in states without such laws. Using the information disclosed in the 10-K report on whether the firm owns trade secrets, we suggest that the existence of trade secret laws enhances the protection effect of firm maintenance of trade secrets, which leads to greater IPO underpricing. Further analyses show that the effect of trade secret laws is reinforced for IPO firms operating in complex industries, IPO firms with R&D investments, and large IPO firms, suggesting that trade secret laws increase the difficulties investors face in assessing the intrinsic value of such firms. [ABSTRACT FROM AUTHOR]

The role of underwriters is altered in new seasoned equity offering deal types in which the offering follows quickly after its announcement. Controlling for the endogenous matching between issuing firms and underwriters, we find increased underwriter reputation mitigates the immediate price impact of announcing an accelerated bookbuilt offering, exacerbates the price impact of announcing a bought offering, and has no immediate price impact for fully marketed deals. In contrast, underwriter reputation positively affects price outcomes for fully marketed deals around the offer date. Reputation effects are not apparent in the absence of controlling for the endogenous matching. [ABSTRACT FROM AUTHOR]

We investigate how in the context of Corporate Venture Capital (CVC), the investment decisions affect the likelihood of their subsequent exit strategies. We use OLS and probit regression as well as Weibull distribution of residual values, given its reliability and validity for studying lifetime analysis. Based on a sample of 8722 VC-backed ventures with the first investment dates between 1999 and 2018 in United States (US) and United Kingdom (UK), the results show that the presence of CVCs positively affects the funding amounts and the duration of the investment. CVC funds are more generous and more patient than Independent Venture Capital (IVC) funds regarding their investments in ventures. Moreover, the findings provide evidence that the exit strategies are directly influenced by the funding amounts and the duration of the investment which are influenced, in turn, by the fund type. Greater funding increases the likelihood of IPO exit which is reduced by longer investment duration. Our results are robust to alternative estimation methods, namely two-stage treatment-effects regressions. These results help the various stakeholders (VC funds, investors, ventures) make crucial decisions regarding investment amounts and duration, and exit. [ABSTRACT FROM AUTHOR]

We develop a mixed duopoly model with quality‐differentiated products. The public firm offers its product for free to eligible individuals, while the private firm chooses its product quality and price to maximize profit. We calibrate the model to health insurance for the U.S. working‐age population, with Medicaid being the public firm. We examine distributional implications of policies that expand Medicaid to various degrees. Despite potentially significant inefficiency of Medicaid, its expansion is welfare improving. Central to these findings is the significant market power of the private firm when left unchecked, which is increasingly disciplined as more individuals become Medicaid eligible. [ABSTRACT FROM AUTHOR]

The late 1880s saw the rise of early public accounting practice in the United States and the origin of emerging national firms, one of which was Barrow, Wade, Guthrie & Co. (BWG). BWG served a broad range of clients, from railroads to breweries, and a variety of financial and other commercial enterprises. This project was started as a search for the answer to a mystery surrounding early audit reports and then developed into a history of BWG from its origin until the merger with Peat Marwick in 1950. Throughout its existence, BWG was at the forefront of the trends in public accounting practice. The firm and its employees were leaders in all aspects of the developing CPA profession. The paper contributes to historical literature and advances the understanding of the earliest periods of public practice by emerging public accounting firms. [ABSTRACT FROM AUTHOR]

This paper aims to investigate the effect of Initial Public Offerings (IPOs) on stock market volatility in the United States using the Generalized Autoregressive Conditional Heteroskedasticity (GARCH) model. The study utilizes daily data from January 2020 to October 2022 on the Standard & Poor's 500 Index (S&P 500) and IPO firms listed on the New York Stock Exchange (NYSE) their IPO dates during the same period. The GARCH model is employed to estimate the volatility of the S&P 500 index stock prices after the IPOs announcements during the first day, first five days, and first ten days. The study finds that IPOs significantly impact volatility in the US market, and the effect is more pronounced in the short term. We discovered that IPOs after their announcements during the first five days have a negative impact on other stock prices in the S&P500 index. The effects are stronger for the first day of initial public offering come to the market while there is a negative impact on the 10th day of IPOs in the market but it is not statistically significant. The downward-sloping demand curve hypothesis is supported by these findings. These results have important implications for investors, market regulators, and policymakers. Investors should be aware of the potential for increased volatility during periods of IPO activity and adjust their investment strategies accordingly. Market regulators may need to consider implementing measures to mitigate the impact of IPOs on market volatility. Policymakers may also need to consider the potential economic effects of IPOs and the associated increase in market volatility to ensure a stable and efficient stock market. [ABSTRACT FROM AUTHOR]

The resurgence of Special Purpose Acquisition Companies ("SPACs") in the U.S. securities market has demonstrated potential as an alternative to the traditional initial public offering ("IPO"). However, the evolution of SPACs from their fraudulent "blank check" ancestors has left the Securities and Exchange Commission ("SEC") weary of SPACs' continued presence in the market. Currently, SPACs exist as an exception to Rule 419 and the Penny Stock Reform Act of 1990, thereby allowing them to escape the rigorous disclosure requirements that not only eradicated their ancestors, but also significantly burdened the timeline of the traditional IPO process. While many consider SPACs a unique opportunity for non-institutional investors to reap benefits similar to those seen in private equity, a closer look into their evolution in the market suggests an entirely different conclusion. This Comment offers a critical assessment of the SPAC structure and advances unique regulatory solutions. It begins with a focus on the landscape surrounding the SPAC structure, looking to the evolution of securities market regulations and the rise and evolution of the SPAC as an alternative to the traditional IPO. Following discussions on the various tensions present in the current form, this Comment sheds light on persistent issues lingering within the current form, illustrating the necessity for SPAC reform. Finally, this Comment proposes four solutions--bringing back investor voice, mitigating dilution to the investors, tidying disclosure requirements, and revisiting due diligence--and argues the need for SPAC creators to accept guidance from the SEC and look inward to SPAC performance to undergo self-reform in order to avoid the possibility of SPACs being regulated out of existence. [ABSTRACT FROM AUTHOR]

Prior research acknowledged the importance of founders in affecting firm strategy and performance, but large empirical analyses of profiles of entrepreneurial founders are scant, in part because of the difficulty in collecting founder data. This study represents the first effort to study entrepreneurial founders across half a century. Using a hand‐collected unique and comprehensive dataset, this research sheds light on the demographic, educational, and career characteristics of founders for the venture capital (VC)‐backed initial public offering (IPO) companies during 1960–2015. The research has useful implications for researchers and practitioners. By understanding who the founders are and where they come from, this article scratches the surface of founder characteristics and firm performance from which further work could build on and provides useful information for founders who are likely to seek VC‐funding and IPO to build realistic expectations, VC firms who are interested in investing in potentially rewarding and promising new ventures to select good targets, and governments that struggle to promote entrepreneurial efforts and enhance economic development, in general, to come up with appropriate policies. [ABSTRACT FROM AUTHOR]

Special purpose acquisition companies (SPACs) were the financial-legal hit of 2021, before they weren’t. Breaking records and displacing, to an extent, conventional initial public offerings (C-IPOs), even as C-IPOs also boomed, SPACs spiked, in part, because— in addition to myths about their financial attributes, which others have debunked— several myths about SPAC law circulated widely and persistently. SPAC promoters claimed that (1) securities regulations ban projections from being used in C-IPOs, (2) liability related to projections was lower and more certain in SPACs than it was (and is), (3) the Securities and Exchange Commission (SEC) registration process delays C-IPOs more than SPACs, (4) the SEC changed SPAC accounting rules in early 2021, (5) this “change” was the primary reason the SPAC wave slowed and peaked, and (6) the Investment Company Act clearly does not apply to SPACs. Consistent with these being myths, de-SPACs from 2021 are experiencing significant levels of litigation—even higher than in C-IPOs. These myths were aimed primarily not at unsophisticated retail investors, but business journalists, sophisticated SPAC sponsors, and owner-managers of SPAC targets. They illustrate a broader and underappreciated fact that complex financial- legal innovation permits promoters to exploit the “credence good” character of professional advice, perpetuate “deep fraud,” and distort markets and asset prices more and longer than conventional theory assumes. To moderate deep fraud’s market distortions, proposed SEC reforms should be finalized to improve SPAC disclosure, enhance investor understanding of their risks, and reduce regulatory uncertainties that contribute to legal myths about SPACs, but the inherent complexity of the product may require an ongoing role for regulators to speak clearly about SPAC law and its uncertainties. [ABSTRACT FROM AUTHOR]

Dazed and confused by the wild hype surrounding "gazelles" and "unicorns," entrepreneurship researchers have focused on the "black swans" of the entrepreneurial world, even though IPOs and venture capital financing of firms are extremely rare events. Despite the rarity of IPOs and obtaining venture capital, entrepreneurship conferences and journals have been filled with papers on various aspects of the process of "going public" and "VC networks." Fortunately, in the middle of the Silicon Valley mania, other scholars have been paying attention to the more mundane aspects of business start-ups—the ordinary business starts, numbering in the hundreds of thousands for businesses with employees. The purpose of this article is to address what we believe to be scholars' misplaced attention on the extreme and their neglect of the mundane in the study of entrepreneurship. Correcting the misperception that has been introduced through selection biases favoring growing and profitable firms will give scholars and policymakers a more accurate and policy-relevant picture of entrepreneurship in the 21st century. [ABSTRACT FROM AUTHOR]

The article highlights the dominant influence gained by Special Purpose Acquisition Company (SPAC) in the U.S. over a short period of time. Topics include celebrities and public figures in the U.S. who participated in SPAC activities such as Shaquille O'Neal and Serena Williams, the proposal of new rules by the U.S. Securities and Exchange Commission (SEC) to govern SPACs, the mechanics and history of the U.S. SPAC, and the difference between a SPAC and an initial public offering (IPO).

Alibaba, the e-commerce giant that completed a record-setting IPO in the United States in 2014 and reached a peak value of more than $800 billion in 2020, is one of hundreds of China-based firms whose listing in the United States—rather than in China— makes their controlling insiders essentially law-proof: the non-Chinese corporate and securities laws governing these firms are unenforceable because the firms’ insiders, records, and assets are in China. The fact that a foreign firm can minimize legal constraints by listing in the United States rather than in its home country casts doubt on the claim that foreign firms list in the United States to bond insiders to its tough securities law. Indeed, for China-based firms, listing in the United States but not in China insulates insiders from any securities law. Ironically, U.S. securities law not only allows these firms to list in the United States, but also allows them to disclose less than domestic firms. This uneven treatment favors foreign entrepreneurs and likely harms U.S. investors. Recent U.S. efforts to address the risks posed by China-based firms leave the fundamental problem of lawproof insiders unsolved. We suggest ways to better protect investors and, more generally, argue that enforceability is key to corporate governance. [ABSTRACT FROM AUTHOR]

The Jumpstart Our Business Startups (JOBS) Act was signed into law on April 5, 2012. A key objective of the JOBS Act was to allow new ventures in the United States to go public and raise growth capital more easily and cost-effectively than before. The aim of this paper is to discuss the implications of the JOBS Act for initial public offerings (IPOs). We argue that the JOBS Act gives rise to important spillover effects that may create ambiguous consequences for firms' IPOs. The central question is whether the JOBS Act's mandate of facilitating fund raising can come to fruition and, if so, which features of it may lead to shifts in capital markets in entrepreneurship. Our paper begins to address these questions and aims to serve as a catalyst for future academic work in this area. [ABSTRACT FROM AUTHOR]

The article examines the growing popularity of special purpose acquisition companies (SPAC) as an alternative to initial public offerings (IPO). It argues that the regulatory framework for SPACs in the U.S. should be reworked because it creates discordant incentives between management and investors. Topics covered include history of blank check companies and SPACs, the traditional IPO process, and the advantages and disadvantages of SPACs compared to traditional IPOs.

We construct a mortality table for U.S. public companies during 1985–2006. We find that the age-specific mortality rates of firms initially increase, peaking at age three, and then decrease with age, implying that the first 3 years of public life are critical. Financial intermediaries involved around the “public birth” of a firm (e.g., venture capitalists (VCs) and high-quality underwriters) are associated with lower firm mortality rates, sometimes for up to 7 years after the initial public offering (IPO). VCs reduce mortality rates more through natal financial care than through selection, whereas high-quality underwriters affect firm mortality more through selection. [ABSTRACT FROM PUBLISHER]

Organizational theory recognizes reputation as a central element to understanding the firm. Examining investor valuations of 1,676 initial public offerings (IPOs) in the United States from 1990 to 2011, we find that reputation transfer through an association of an IPO firm with a venture capital (VC) firm represents a resource whose value can increase/decrease over time depending on investors' valuations of prior IPOs funded by a VC firm. We conclude that the impact of reputation transfer through association is not unidirectional but, instead, is to be viewed in the context of prior reputational development of organizations the focal firm is associated with. Furthermore, we find that three "transfer enhancers" can improve the impact of VC firm reputation transfer on IPO valuations, including the VC firm's past experience intensity, the diversity of IPO experiences, and the number of prior syndicated IPOs involving the VC firm as a lead investor. [ABSTRACT FROM AUTHOR]

During 1980–2000, an average of 310 companies per year went public in the United States. Since 2000, the average has been only 99 initial public offerings (IPOs) per year, with the drop especially precipitous among small firms. Many have blamed the Sarbanes-Oxley Act of 2002 and the 2003 Global Settlement’s effects on analyst coverage for the decline in IPO activity. We find very little support for the conventional wisdom, and we offer an alternative explanation. Our economies of scope hypothesis posits that the advantages of selling out to a larger organization, which can speed a product to market and realize economies of scope, have increased relative to the benefits of operating as an independent firm. [ABSTRACT FROM PUBLISHER]

Fewer companies are going public in the United States, but public companies are still the focus of securities law and enforcement. A major exception is that anti-fraud provisions apply to all companies, public or private. Theranos is a prominent example. The Securities and Exchange Commission ("SEC") sued this private company for securities fraud. This Article examines one societal cost of the decline of public companies: the loss of information needed to detect and punish fraud. It analyzes the SEC's securities fraud enforcements against private companies and assesses the information costs of moving to an anti-fraud-only regime. It concludes by identifying ways to incentivize information disclosure in the newly private universe of corporations, including a proposal to expand whistleblower protection for employees of private companies. [ABSTRACT FROM AUTHOR]

The article examines if general market conditions influence assurance services that auditors provide on initial public offerings (IPO). It states that IPO markets experience significant fluctuations in volume, known as hot and cold markets, and that underwriters and issuers see hot markets as windows of opportunity to maximize proceeds from IPOs. It mentions that assurance fees are lower during hot markets and examines if client size, filing type, risk, and IPO delays impact assurance fees differentially during hot markets compared to neutral or cold market conditions. It comments that there was no evidence that the effect hot markets have on assurance feeds results from characteristic differences between companies issuing securities in different market conditions.

This article examines the role of marketing in the context of initial public offerings (IPOs), a neglected issue in the extant literature. The results from a large-scale, cross-industry study indicate that firms' pre-IPO marketing spendings help reduce IPO underpricing and boost IPO trading in the stock market. The econometric models also suggest that these effects are heterogeneous; that is, they are more salient for firms with higher cost reduction efficiency and in markets with a smaller number of historical IPOs.With regard to theory, this research ushers in a greenfield of IPOs, helping build more powerful theories of market-based assets and customer equity.With regard to practice, it builds the case for not cutting marketing before an IPO. Prudent investors may be better able to pick “star” IPOs if they can track pre-IPO marketing spendings and model firm cost reduction efficiency simultaneously. Overall, this article offers fresh implications for the marketing–finance interface, uncovering brand-new IPO-based reasons that marketing can help create shareholder value. [ABSTRACT FROM AUTHOR]

In this study we advance current research on social influence in markets by examining how the recency and availability of information about others' actions within and between different communities influence their allocation of attention and their evaluations. Specifically, we examine how the media and investors allocate attention to and evaluate newly public firms in the days following their initial public offerings (IPOs). Our findings have implications for understanding the fieldwide processes through which the value of new firms is established in markets. [ABSTRACT FROM AUTHOR]

We examine the evolution of insider ownership of IPO firms from 1970 to 2001 to understand how U.S. firms become widely held. A majority of these firms has insider ownership below 20% after 10 years. Stock market performance and liquidity play an extremely important role in ownership dynamics. Firms with stocks that are highly valued, are liquid, and have performed well experience large decreases in insider ownership and become widely held. Ownership also falls for low cash flow and high capital expenditures firms. Surprisingly, variables proxying for agency costs have limited success in explaining the evolution of insider ownership. [ABSTRACT FROM AUTHOR]

Brennan and Franks (1997) and Stoughton and Zechner (1998) provide contrasting arguments for why monitoring considerations create incentives for managers to underprice their firms' IPOs (initial public offerings). Like Smart and Zutter (2003), we examine these arguments using a sample of U.S. IPOs. However, we find evidence that the determinants of initial returns, institutional shareholdings, and post-IPO likelihood of acquisition are not consistent with these arguments. Thus, we conclude that monitoring considerations are not important determinants of IPO underpricing. [ABSTRACT FROM AUTHOR]

This study empirically examines the impact of various competitive cost proxies on the extent of product-related information disclosed by biotech initial public offerings (IPOs) in their prospectuses. The choice of biotech companies, which operate in a fiercely competitive environment, crystalizes the importance of competitive disclosure costs. The focus on product-related information is aimed at a disclosure set for which potential competitive harm is a priori substantial. Our empirical analyses establish three disclosure determinants: the stage of product development, availability of patent protection, and venture capital backing. Additionally, we find the relative size of ownership retained by pre-IPO owners to be negatively related to the extent of disclosure, as predicted by signaling models. We also document the expected inverse relation between the extent of information conveyed by the biotech IPOs and widely used measures of information asymmetry: the bid-ask spread and quoted depth, as well as stock return volatility. [ABSTRACT FROM AUTHOR]

The author presents discussion and reflection in response to the article "Competitive Costs of Disclosure by Biotech IPOs," by Re-Jin Guo, Baruch Lev, and Nan Zhou from the May 2004 issue. During the author's exploration of the original article, he focuses on three main issues, including the IPO as an experimental setting, competitive costs, and information asymmetry. The author's declared purpose is to point out strengths and weaknesses of each aspect of the study and to encourage future research into these issues.

We investigate the factors influencing the selection of stocks for option listing. Exchanges tend to list options on stocks with high trading volume, volatility, and market capitalization, but the relative effect of these factors has changed over time as markets have evolved. We observe a shift from volume toward volatility after the moratorium on new listings ended in 1980. Using control sample methodology designed to correct for the endogeneity of option listing, we find no evidence that volatility declines with option introduction, in contrast to previous studies that do not use control samples. [ABSTRACT FROM AUTHOR]

We introduce the concept of the network architect to extend theory explaining how brokers create and manage structural holes in mediated markets. We argue that a broker's social resources and dependence on the market, along with exogenous deal conditions, influence the broker's motivations and willingness to make tradeoffs between long-term and short-term considerations when constructing deal networks. We develop our model and propositions in the context of the U.S. initial public offerings market and then generalize these arguments to other market contexts. [ABSTRACT FROM AUTHOR]

Financial economists have intensely debated the performance of IPOs using data after the formation of Nasdaq. This paper sheds light on this controversy by undertaking a large, out-of-sample study: We examine the performance for five years after listing of 3,661 U.S. IPOs from 1935 to 1972. The sample displays some underperformance when event-time buy-and-hold abnormal returns are used. The underperformance disappears, however, when cumulative abnormal returns are utilized. A calendar-time analysis shows that over the entire period, IPOs return as much as the market. The intercepts in CAPM and Fama-French regressions are insignificantly different from zero, suggesting no abnormal performance. [ABSTRACT FROM AUTHOR]

This paper explores a model based on agents with heterogenous beliefs facing short sales restrictions, and its explanation for the rise, persistence, and eventual fall of Internet stock prices. First, we document substantial short sale restrictions for Internet stocks. Second, using data on Internet holdings and block trades, we show a link between heterogeneity and price effects for Internet stocks. Third, arguing that lockup expirations are a loosening of the short sale constraint, we document average, long-run excess returns as low as -33 percent for Internet stocks postlockup. We link the Internet bubble burst to the unprecedented level of lockup expirations and insider selling. [ABSTRACT FROM AUTHOR]

This paper offers a new explanation for the prevalent use of convertible securities in venture capital finance. Convertible securities can be used to endogenously allocate cash-flow rights as a function of the state of the world and the entrepreneur's effort. This property can be used to induce the entrepreneur and the venture capitalist to invest efficiently into the project. The result is robust to renegotiation and to changes in the timing of investments and information flows. The model is consistent with the observations that conversion is often automatic and that convertible securities are rarely used by outside investors. [ABSTRACT FROM AUTHOR]

IPO underpricing reached astronomical levels during 1999 and 2000. We show that the regime shift in initial returns and other elements of pricing behavior can be at least partially accounted for by marked changes in pre-IPO ownership structure and insider selling behavior over the period, which reduced key decision makers’ incentives to control underpricing. After controlling for these changes, the difference in underpricing between 1999 and 2000 and the preceding three years is much reduced. Our results suggest that it was firm characteristics that were unique during the "dot-com bubble" and that pricing behavior followed from incentives created by these characteristics. [ABSTRACT FROM AUTHOR]

We provide evidence that firms attempting IPOs condition offer terms and the decision whether to carry through with an offering on the experience of their primary market contemporaries. Moreover, while initial returns and IPO volume are positively correlated in the aggregate, the correlation is negative among contemporaneous offerings subject to a common valuation factor. Our findings are consistent with investment banks implicitly bundling offerings subject to a common valuation factor to achieve more equitable internalization of information production costs and thereby preventing coordination failures in primary equity markets. [ABSTRACT FROM AUTHOR]

We examine the costs and benefits of the global integration of initial public offering (IPO) markets associated with the diffusion of U.S. underwriting methods in the 1990s. Bookbuilding is becoming increasingly popular outside the United States and typically costs twice as much as a fixed-price offer. However, on its own, bookbuilding only leads to lower underpricing when conducted by U.S. banks and/or targeted at U.S. investors. For most issuers, the gains associated with lower underpricing outweighed the additional costs associated with hiring U.S. banks or marketing in the United States. This suggests a quality/price trade-off contrasting with the findings of Chen and Ritter, particularly since non-U.S. issuers raising US$20 million-US$80 million also typically pay a 7% spread when U.S. banks and investors are involved. [ABSTRACT FROM AUTHOR]

We examine the expiration of the IPO quiet period, which occurs after the 25th calendar day following the offering. For IPOs during 1996 to 2000, we find that analyst coverage is initiated immediately for 76 percent of these firms, almost always with a favorable rating. Initiated firms experience a five-day abnormal return of 4.1 percent versus 0.1 percent for firms with no coverage. The abnormal returns are concentrated in the days just before the quiet period expires. Abnormal returns are much larger when coverage is initiated by multiple analysts. It does not matter whether a recommendation comes from the lead underwriter or not. [ABSTRACT FROM AUTHOR]

Using a system of three simultaneous equations, we test the predictions of Datar, Feltham, and Hughes 1991 and Hughes 1986 between auditor choice, earnings disclosures, and retained ownership in U.S. firms making initial public offerings of securities. Using a sample of initial public offerings between 1990 and 1997, we find that the demand for high-quality auditors increases with firm risk. Additionally, we find that auditor choice, earnings disclosure, and risk are determinants of retained ownership, which is consistent with the predictions of Datar et al. and Hughes that auditor choice and direct disclosure are substitute signals for ownership retention. Further, our results suggest that the signals chosen (i.e., retained ownership, auditor choice, and disclosure) are related through their cost structures and are chosen jointly to minimize the overall cost to the entrepreneur. [ABSTRACT FROM AUTHOR]

We examine the price discovery process of initial public offerings (IPOs) using a unique dataset. The first quote entered by the lead underwriter in the five-minute preopening window explains a large proportion of initial returns even for hot IPOs. Significant learning and price discovery continues to take place during these five minutes with hundreds of quotes being entered. The lead underwriter observes the quoting behavior of other market makers, particularly the wholesalers, and accordingly revises his own quotes. There is a strong positive relationship between initial returns and the time of day when trading starts in an IPO. [ABSTRACT FROM AUTHOR]

This paper studies Nasdaq market makers' activities during the one and one-half hour preopening period. Price discovery during the preopening is conducted via price signaling as opposed to the auction used to open the NYSE or the continuous market used during trading. In the absence of trades, Nasdaq dealers use crossed and locked inside quotes to signal to other market makers which direction the price should move. Furthermore, we find evidence of price leadership among market makers that bears little resemblance to their IPO/SEO lead underwriter participation. [ABSTRACT FROM AUTHOR]

Gross spreads received by underwriters on initial public offerings (IPOs) in the United States are much higher than in other countries. Furthermore, in recent years more than 90 percent of deals raising $20-80 million have spreads of exactly seven percent, three times the proportion of a decade earlier. Investment bankers readily admit that the IPO business is very profitable, and that they avoid competing on fees because they "don't want to turn it into a commodity business." We examine several features of the IPO underwriting business that result in a market structure where spreads are high. [ABSTRACT FROM AUTHOR]

Debt initial public offerings (IPOs) represent a major shift in a firm's financing policy by both extending debt maturity and altering the public-private debt mix. In contrast to findings for seasoned debt offerings, we document a significantly negative stock price response to debt IPO announcements. This result is consistent with debt maturity and debt ownership structure theories. The equity wealth effect is negatively related to the offer's maturity, and positively related to the degree of bank monitoring. We find that firms with less information asymmetry and firms with higher growth opportunities experience a less adverse stock price response. [ABSTRACT FROM AUTHOR]

Using data on U.S. investment banking firms' syndication in underwriting corporate stock offerings during the 1980s, this study explores the factors that drive alliance formation between two specific firms. We compare resource complementarity status similarity, and social capital as a basis of alliance formation. The findings indicate that the likelihood of investment banks' alliance formation is positively related to the complementarity of their capabilities, as well as their status similarity. Social capital arising from banks' direct and indirect collaborative experiences also plays a very important role in alliance formation. The number of deals given by a lead bank to a potential partner over the past three years has an inverted U-shaped relationship to the probability that the lead bank will invite the potential partner to form an alliance. Our findings indicate that status similarity and social capital have a stronger effect on alliance formation in initial public offering deals than in secondary offering deals, as the former are more uncertain than the latter. Using these findings, we discuss the role of complementarity, status similarity, and social capital in alliance formation. [ABSTRACT FROM AUTHOR]

We investigate the bias in CRSP's Nasdaq data due to missing returns for delisted stocks. We find that the missing returns are large and negative on average, and that delisted stocks experience a substantial decrease in liquidity. We estimate that using a corrected return of 55 percent for missing performance-related delisting returns corrects the bias. We revisit previous work which finds a size effect among Nasdaq stocks. After correcting for the delisting bias, there is no evidence that there ever was a size effect on Nasdaq. Our results are inconsistent with most risk-based explanations of the size effect. [ABSTRACT FROM AUTHOR]

The article discusses the U.S. Securities and Exchange Commission's (SEC's) release of the "Framework for 'Investment Contract' Analysis of Digital Assets" document in April 2019 which is designed to help parties seeking to comply with American federal securities laws, and it mentions initial coin offering (ICO) financing for new business enterprises (startups). Initial public offerings (IPOs) and Bitcoin cryptocurrency are assessed.

Investors have long been unhappy with certain governance arrangements adopted by companies undertaking initial public offerings ("IPOs"), such as dual-class voting structures. Traditional sources of corporate governance rules--the Securities and Exchange Commission, state law, and exchange listing rules--do not constrain these arrangements. As a result, investors have turned to a new source of governance rules: index providers. This Article provides a comprehensive analysis of index exclusion rules and their likely effects on insiders' decision-making. We show that efforts to portray index providers as the new sheriffs of the U.S. capital markets are overstated. Index providers face complex and conflicting interests, which make them reluctant regulators, at best. We put forward an analysis of insider incentives in light of index exclusions and apply it to one of the most important applications of index exclusion rules to date, the recent decision by index providers to exclude from their indexes certain companies with dual-class share structures. We conclude that the efficacy of index exclusions in preventing disfavored arrangements such as dual-class structures is likely to be limited, but not zero. Index exclusions are a corporate governance experiment, one that has important lessons. We examine these lessons, and the way forward for corporate governance. These lessons are all the more important because of the central place of index funds, and therefore index providers, in our capital markets. [ABSTRACT FROM AUTHOR]