UC Berkeley

Corporate disclosures are important means for managers to communicate firm performance and are essential information sources for investors. This dissertation examines corporate disclosures from two distinct angles: economic determinants and consequences of corporate disclosures. I investigate these two topics separately in Chapters 1 and 2.

In Chapter 1, The Jobs Act Did Not Raise IPO Underpricing, my co-authors and I examine how the amount of pre-IPO disclosures affects IPO pricing. While the intended goal of the 2012 JOBS Act was to ease access to capital for Emerging Growth Companies (EGCs), prior studies, notably Barth et al. (2017), find evidence of an increase in IPO underpricing and a higher cost of equity capital for EGC issuers. Using a difference-in-differences design, we find that changes in overall IPO market conditions explain the seeming increase in IPO underpricing. In fact, EGC issuers that take advantage of the accounting disclosure relief afforded by the Act raise capital at higher pre-IPO multiples. These reduced-accounting disclosure EGCs have more speculative valuation profiles and lower institutional ownership and are more likely to destroy long-term shareholder value in the IPO aftermarket. Overall, this chapter offers an alternative perspective on the effect of the JOBS Act on IPO pricing.

In Chapter 2, I examine whether and how the recognition of operating leases on balance sheets influences managerial leasing decisions. In 2019 the FASB implemented ASC 842, which requires companies to capitalize operating leases. Given prior operating lease disclosure in footnotes, it was unclear if capitalization would affect financial statement users or managers. I find that firms' use of operating leases decreases upon the new standard's adoption and that this decline is driven by lease-intensive and less-levered firms. I also document a systematic substitution of operating leases with short-term and variable leases, both of which can still be left off balance sheet. The latter finding suggests that the FASB has not entirely succeeded in preventing firms from opportunistically omitting liabilities from balance sheets. My study responds directly to the FASB's call for research that examines the new standard's unintended consequences on managerial leasing decisions. Overall, I provide evidence that disclosure location (footnote vs. balance sheet) exerts a real effect on managerial behavior.