Journal of Financial Economics Vol. 120 No. 1 2016
Redacting proprietary information at the initial public offering
Abstract
Nearly 40% of IPO firms redact information from their SEC registration filings. These firms exhibit characteristics consistent with the need to shield proprietary information from potential rivals. They experience greater underpricing, but pre-IPO insiders reduce underpricing-related wealth transfers by selling proportionately less of the firm's shares at the IPO, raising more equity financing in later seasoned equity offerings, and selling their own holdings at a relatively slow pace. The information environment of redacting firms reflects proportionately more private information than that of non-redacting firms post-IPO, but this difference abates by the fourth year. Consistent with the view that redacted proprietary information provides competitive advantages, redacting firms exhibit superior financial performance post-IPO. The results illustrate tradeoffs in balancing a firm's needs to protect proprietary information with its capital needs, investor needs for information to price securities, and pre-IPO owner liquidity needs.
- DOI
- 10.1016/j.jfineco.2015.06.016
- Volume
- 120
- Issue
- 1
- Pages
- 102-123
- Language
- en
- Sources
- openalex crossref bibtex:phds-export.bib