Redacting proprietary information at the initial public offering

abstract

• 2016. 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.

authors

• Johnson, Shane

published proceedings

• JOURNAL OF FINANCIAL ECONOMICS

author list (cited authors)

• Boone, A. L., Floros, L. V., & Johnson, S. A.

citation count

• 79

complete list of authors

• Boone, Audra L||Floros, Loannis V||Johnson, Shane A

publication date

• January 2016

publisher

• Elsevier  Publisher

published in

• Journal of Financial Economics  Journal

keywords

• Disclosure
• Information Asymmetry
• Ipo
• Product Markets
• Proprietary Information
• Underpricing

Digital Object Identifier (DOI)

• 10.1016/j.jfineco.2015.06.016

start page

• 102

end page

• 123

volume

• 120

issue

• 1

URL

• http%3A%2F%2Fdx.doi.org%2F10.1016%2Fj.jfineco.2015.06.016