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The Pricing of IPOs Post‐Sarbanes‐Oxley
Author(s) -
Johnston Jarrod,
Madura Jeff
Publication year - 2009
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/j.1540-6288.2009.00219.x
Subject(s) - initial public offering , valuation (finance) , business , transparency (behavior) , accounting , sarbanes–oxley act , underwriting , valuation effects , finance , audit , political science , law
The Sarbanes‐Oxley Act (SOX) imposes new requirements for firms going public. Many provisions of SOX should improve the transparency of U.S. firms going public and therefore reduce the uncertainty surrounding their valuation. We find that initial returns of initial public offerings (IPOs) in the United States have declined since SOX. Furthermore, the aftermarket performance of IPOs since SOX is significantly higher. While the expense of public reporting has increased in the United States because of SOX, the valuations of newly public firms at the time of the IPO are subject to less uncertainty and smaller aftermarket corrections.