Spindler on IPO Underpricing

IPO Underpricing and Disclosure, by James C. Spindler, University of Southern California Law School, was recently posted on SSRN.  Here is the abstract:

Using a unique data set, I find that U.S. IPO prospectus disclosure dramatically affects the degree of first day underpricing of the new issue, consistent with theories of underpricing as caused by informational asymmetry. In particular, a 1 standard deviation increase in positive prospectus disclosure is associated with almost a third reduction in first day underpricing. Further, this may derive from disclosure-related litigation risk: an increase in negative prospectus disclosure is associated with an increase in subsequent IPO-related lawsuits, which suggests that less positive (or more negative) disclosure is a reaction to litigation risk.