Corporate Governance and Voluntary Disclosure in a Deregulatory Environment: Evidence from Emerging Growth Companies

• In Event: Public Interest

Abstract

This paper utilizes a unique financial reporting and disclosure deregulation event for initial public offerings (IPO) – the Jumpstart Our Business Startups (JOBS) Act – to examine the relationship between corporate governance and voluntary disclosure in the pre-IPO setting. Logistic regression analyses of the determinants of reporting and disclosure choices of 255 firms filing final IPO prospectuses from April 6, 2012 through August 31, 2013 indicate a positive relationship between both board independence and audit committee accounting expertise and the decision to forgo JOBS Act disclosure relief. In particular, board independence is positively associated with ex-ante firm choices to adopt new accounting standards on public company effective dates in order to ensure firm financial statements are comparable to that of other issuers. Additionally, audit committee accounting expertise is positively associated with the extent of ex-post disclosure of historical audited financial information in IPO prospectuses. This paper is one of the first studies to show that even in a voluntary, as opposed to mandatory, disclosure regime, corporate governance impacts the extent of smaller, emerging growth company disclosures in the pre-IPO setting.

Author

• Aleksandra Zimmerman, Case Western Reserve University