THE UNDERPRICING OF “SECOND” INITIAL PUBLIC OFFERINGS

The underpricing of initial public offerings (IPOs) of equity represents a well-documented empirical phenomenon. One prominent explanation for this underpricing relies on the uncertainty investors feel about the value of the issuer. In this paper, this asymmetric information hypothesis is tested by examining the underpricing of IPOs of seventy-four firms for which the uncertainty about the value of the firm is likely to be substantially reduced. These firms were once publicly owned, then taken private, and subsequently returned to public ownership. Findings show that the IPOs of these “reverse leveraged buyouts” are significantly less underpriced than typical IPOs. These results support the asymmetric information hypothesis.     

Skinner's “Interpretation Panel”— A Means to Balance “Power”

The rules versus principles debate and the vital importance of context ‐ the circumstances‐specific nature of judgment ‐ are at the heart of Ross Skinner's suggestion for an “interpretation panel". International considerations and developments involving governance and regulation have created imbalances in power, expertise, and impartiality, increasing the importance of and need for such a panel. This analysis considers the nature of the problem, how professional judgment has been characterized, and why a panel would be appropriate to address, among other concerns, the audit committee's dilemma when accounting disputes arise. Evidence is provided that management turnover is higher in cases involving multiple restatements, governance problems, or regulators' sanctions. Although, intuitively, management turnover is likely to be associated with widely publicized restatements, some patterns suggest that it is a function of entity size, scope of management changes considered, and the manner in which the restatement was identified. Specifically, an identifiable source of discovery, as well as external involvement, is associated with a greater propensity for management change. In contrast, restatements linked to changes in available guidance from regulators are less likely to result in such turnover. One implication is that effective control design and monitoring to facilitate internal discovery of errors can decrease the likelihood of multiple restatements and reduce fault finding that leads to management change. The judgmental nature of restatements suggests that an infrastructure supporting “right‐mindedness” does have merit. An interpretation panel would increase the feasibility of principles‐based standards, facilitating timely resolution of accounting‐associated disputes and thereby enhancing the information environment underlying the allocation of capital.     

A SHORT NOTE ON “IS THE EMPHASIS OF CAPITAL BUDGETING THEORY MISPLACED?”

This note relates to Paul King's article (in the Spring 1975 JBFA), which may add little to an earlier contribution by W.W. Haynes and M.B. Solomon, Jnr. Specifically, it is based on a "misplaced" caricature of "the scientific model". There seem to be serious questions as to the empirical status of the model, and more recent contributions to the theory of organisational decision-making also need to be considered.
Dans ce comnentaire, on s'eteńd sur l'article de Paul King paru dans le numéro de Printemps 1975 de ce journal. Son article ne semble fournir guère plus d'informations que la précédente étude présentée par W.W. Haynes et M.B. Solomon, Jnr. I1 insiste avant tout sur un aspect détourné du 'modèle scientifique', ce qui semble poser de sérieux problèes quant aux statuts empiriques attribues au modèle, et demande que l'on s'interroge devant de plus récentes études concernant la théorie de gestion des structures.
Diese Stellungnahme bezieht sich auf die Abhandlung von Paul King (in der Frühjahrsausgabe der JBFA), die wenig zum früheren Artikel von W.W. Haynes und M.B. Solomon, Jnr., beitragen mag. Insbesondere basiert diese Abhandlung aug einer unberechtigen Karikatur des "wissenschaftlichen Modells". Ausserdem ist der empirische Status des Modells höchst fraglich. Darüberhinaus müssen die neuen Beiträge zur Theorie des Organisationsentscheidungsprozesses berücksichtigt werden.     

Disclosure “Bunching”

This paper studies managers' preferences among information acquisition and disclosure policies when their firms are required to engage in “real‐time” or “continuous” financial reporting. The paper predicts that for many, but not all, processes describing the distribution of their firms' cash flows, when subject to such reporting requirements, managers will engage in disclosure “bunching,” that is, they will bunch the discretionary component of the information they acquire and disclose into a single point in time rather than spread the acquisition and disclosure of that information over time. We show that managers' preferred bunching period depends on managers' strategy for trading in their firms' shares, managers' risk aversion, the risk premium the capital market attaches to firms' shares, and the size of managers' initial ownership stakes in their firms. We also study and characterize how the equilibrium prices of firms' shares vary over time and also how managers' optimal trading strategies vary with their most preferred “bunching” strategies. Several extensions confirm the robustness of the optimality of disclosure “bunching.”     

The Effects of Monetary Policy “News” and “Surprises”

There is substantial agreement in the monetary policy literature over the effects of exogenous monetary policy shocks. The shocks that are investigated, however, almost exclusively represent unanticipated changes in policy, which surprise the private sector and which are typically found to have a delayed and sluggish effect on output. In this paper, we estimate a New Keynesian model that incorporates news about future policies to try to disentangle the anticipated and unanticipated components of policy shocks. The paper shows that the conventional estimates confound two distinct effects on output: an effect due to unanticipated or “surprise” shocks, which is smaller and more short‐lived than the response usually obtained in the literature, and a large, delayed, and persistent effect due to anticipated policy shocks or “news.” News shocks play a larger role in influencing the business cycle than unanticipated policy shocks, although the overall fraction of economic fluctuations that can be attributed to monetary policy remains limited.