Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Sunday, October 17, 2010

Agrawal & Cooper on Accounting Scandals in IPO Firms

Accounting Scandals in IPO Firms: Do Underwriters and VCs Help?, by Anup Agrawal, University of Alabama - Culverhouse College of Commerce & Business Administration, and Tommy Cooper, Kansas State University - Department of Finance, was recently posted on SSRN.  Here is the abstract:

We examine whether underwriter reputation, venture capitalist (VC) backing, and VC reputation are related to the probability that a newly public firm has serious accounting problems. Using a novel dataset, we find that the probability of restatement by an IPO firm is positively related to underwriter reputation and negatively related to VC backing, VC reputation and VC maturity. Our results do not appear to be driven by the endogeneity of underwriter reputation or VC backing. Our findings suggest that while VCs positively influence the financial reporting quality of IPO firms, underwriters’ concerns about revenue generation outweigh their concerns about reputation.

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