The oversight role of regulators: evidence from SEC comment letters in the IPO process

Bing Li*, Zhenbin LIU

*Corresponding author for this work

    Research output: Contribution to journalJournal articlepeer-review

    34 Citations (Scopus)


    This study investigates how regulatory oversight affects the price formation of initial public offerings (IPOs). We provide evidence on the oversight role of the US Securities and Exchange Commission (SEC) by examining the effects of comment letters issued by the SEC in the process through which companies are initially listed. We find that IPO issuers reduce their offer price if they receive comment letters. The reduction in price from the IPO filing date to the final issue date is greater when the IPO firm has more correspondence with the SEC. The pricing impact of SEC comment letters is more pronounced for IPO issuers with greater hyping incentives. Moreover, we find that IPO firms that receive more comment letters have similar levels of underpricing and outperform over the long run after the issue date, compared with IPOs with fewer comment letters.

    Original languageEnglish
    Pages (from-to)1229-1260
    Number of pages32
    JournalReview of Accounting Studies
    Issue number3
    Publication statusPublished - 1 Sept 2017

    Scopus Subject Areas

    • Accounting
    • Business, Management and Accounting(all)

    User-Defined Keywords

    • Disclosure
    • Hyping
    • Information asymmetry
    • Price formation
    • SEC comment letters


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