Do expert informational intermediaries add value? Evidence from auditors in microcap IPOs

• 成果类型: Article
• 署名作者: Weber, J; Willenborg, M
• 署名单位: Massachusetts Institute of Technology (MIT); University of Connecticut
• 刊物名称: JOURNAL OF ACCOUNTING RESEARCH
• ISSN/ISSBN: 0021-8456
• DOI: 10.1111/1475-679X.00120
• 发表日期: 2003
• 页码: 681-720
• 关键词: initial public offerings; QUALITY; MARKET; determinants; valuation; lawsuits; fees

摘要

Do expert informational intermediaries add value? We address this question by examining the informativeness of the audit report contained in the prospectus associated with a firm's initial public offering (IPO). At the time of the IPO, there is a relative lack of information to facilitate the establishment of equity values, suggesting that the information provided by outside experts (e.g., auditors, under-writers) is particularly important. In this article we study small, non-venture-backed IPOs, a segment of the market with the poorest long-run performance and where the prestigious audit firm is often the sole (if any) expert present. We find that the pre-IPO opinions of larger auditors are more predictive of post-IPO negative stock delistings. Of particular note, the opinions of the national-tiered firms are comparably predictive to those of the Big 6, though this finding emerges only after we consider the selectivity-based differences in the clients that hire these national firms. Our findings also indicate that, for larger auditors the presence of a pre-IPO going-concern opinion is more strongly associated with first-year stock returns and that larger auditors are more likely to give such opinions to their distressed clients. Overall, we address a deficiency in the literature relating to the paucity of evidence on the value of auditor opinions to investors The fate of these businesses highlights the perils that individual investors expose themselves to, often unknowingly, when they snap up stock in risky, unfamiliar companies underwritten by small brokerage houses with aggressive sales forces.... The brokers hyped the offerings, profited from the run-up of the stocks and then dumped shares, often leading to steep losses among individual investors. If investors did their homework, some of this could be avoided because a lot of the information is available, says Bill Singer, a partner in Manhattan-based law firm.... They could do some minimal research and find out all sorts of terrible stuff.