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Working Papers

Does the Confidential IPO Registration Process Create Value?  (Job Market Paper)

Mengnan Zhu



Draft Registration Statement,

Textual Analysis

This paper studies the confidential IPO registration process adopted by 86% of firms since the JOBS Act of 2012. Using textual analysis, I am the first to investigate the changes in information content between draft registration statements (DRS) and corresponding formal prospectus (Form S-1). I show that valuable information is produced during the confidential review process between the firm and SEC. I construct a novel proxy for the content of SEC comment letters before their release, which leads to a 4.5% cumulative abnormal return. I find that changes in the proportion of positive words are strongly associated with operating performance, reflecting the fundamental value of offerings. Moreover, changes in word content indicate changes in firm’s information environment that can further explain offer price adjustment and underpricing. Lastly, the evidence suggests the confidential review process significantly improved disclosure transparency, while SEC has remained neutral in the firm’s withdrawal decision.

Who You Are Matters More Than What You Do: Financing Expectations and
Firm Performance 

with Mark Kamstra, Debarshi Nandy, Pei Shao

Capital Structure,

Security Issuance,


Random Forest

The decision-making process of firms’ security issuance has been hypothesized in prior studies to be an adjustment toward optimal capital structure, a signal of true firm value in the presence of information asymmetry, or an attempt to take advantage of higher valuation through market timing. We contribute to and extend this literature using transaction-level data and accounting for self-selection in security issuance choice. Using traditional econometric and machine learning techniques, we develop security choice models for predicting firm financing choices based on ex-ante financing expectations. The paper examines the impact of ex-ante financing expectations on the announcement effect, long-run stock performance, and long-run operating performance, subsequent to debt and equity issuance. We find heterogeneous market reactions to security issuance across financing expectations. We show market reacts to the type of firm that undertakes a surprise issuance and not to the particular security type per se.

Is Going Public via SPAC Regulatory Arbitrage? A Textual Analysis Approach

with Yaxuan Wen


Regulatory arbitrage,

Textual analysis

We study firms’ incentives of going public via Special Purpose Acquisition Company (SPAC). We argue that going public via SPAC is regulatory arbitrage, through which firms circumvent the SEC review process in conventional IPO registration by providing less comprehensive and over-confident disclosures to the public. Using textual analysis, we compare the information content of prospectuses and merger proxy statements in SPAC IPOs to their propensity-score-matched IPO peers. We find that SPAC IPOs contain 44% less pessimistic statements, 61% more definitive statements, and 53% fewer unique financial words. Additionally, we show that the differences in the above-mentioned aspects between SPAC IPOs and their peers become negligible in mandatory annual report filings, where regulatory arbitrage no longer exists. Lastly, we document the impact of regulatory arbitrage on firms’ litigation risk, operating performance, and stock performance. We call for specific regulations on SPAC IPOs to maintain information transparency and a fair public capital market.

Are IPOs Systemically Overvalued? Insights From Prospectus

with Debarshi Nandy



Risk Factors,


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