Large shareholders and disclosure strategies: Evidence from IPO lockup expirations |
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Authors: | Yonca Ertimur Ewa Sletten Jayanthi Sunder |
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Institution: | 1. Leeds School of Business, University of Colorado at Boulder, 419 UCB, 995 Regent Drive, Boulder, CO 80309, USA;2. Boston College, 140 Commonwealth Avenue, Fulton 520 D, Chestnut Hill, MA 02482, USA;3. University of Arizona, 1130 E Helen Street, Suite 301G, Tucson, AZ 85712, USA |
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Abstract: | We examine the effect of large shareholders? ex ante selling incentives on firms? voluntary disclosure choices in the setting of IPO lockup expirations. We find evidence that managers delay disclosures of bad news, not for their own benefit, but to enable influential pre-IPO shareholders to sell their shares at more favorable prices. Delays are more pronounced when aggregate selling incentives are greater, when uncertainty is high, and when venture capitalists, influential investors with strong selling incentives, own more shares. Simultaneously, managers? disclosure decisions reflect litigation concerns; no significant delays occur when litigation risk is high or when managers trade themselves. |
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