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Management. We thank the participants at the University of Michigan brown bag workshop for helpful comments and suggestions. Any errors are our own. Do stock prices underreact to SEO announcements? Evidence from SEO Valuation This paper examines whether the market underreacts to the negative information implicit in SEO announcements. We find that it does but conditional on the valuation of SEO firms prior to the SEO issue date. SEO firms that are overvalued relative to their industry peers experience a smaller decline in market value on the SEO announcement day but experience a larger decline over the next five years. The results are robust to various ways of choosing industry peers and valuation multiples and various methodologies for computing risk-adjusted abnormal returns. Cross-sectional regressions indicate SEO P/V ratios (offer-price to value ratio based on relative valuation techniques) are significantly positively related to announcement day returns and significantly negatively related to long-run returns even after controlling for expected growth rates, accruals, and B/M ratios. Additional tests indicate overvalued SEOs earn lower returns around future quarterly earnings announcement dates and do not exhibit superior ex-pos

Initial Public Offerings and the Firm Location

The firm geographic location matters in IPOs because investors have a strong preference for newly issued local stocks and provide abnormal demand in local offerings. Using equity holdings data for more than 53,000 households, we show the probability to participate to the stock market and the proportion of the equity wealth is abnormally increasing with the volume of the IPOs inside the investor region. Upon nearly the universe of the 167,515 going public and private domestic manufacturing firms, we provide consistent evidence that the isolated private firms have higher probability to go public, larger IPO underpricing cross-sectional average and volatility, and less pronounced long-run under-performance. Similar but opposite evidence holds for the local concentration of the investor wealth. These effects are economically relevant and robust to local delistings, IPO market timing, agglomeration economies, firm location endogeneity, self-selection bias, and information asymmetries, among others. Findings suggest IPO waves have a strong geographic component, highlight that underwriters significantly under-estimate the local demand component thus leaving unexpected money on the table, and support state-contingent but constant investor propensity for risk

The Strategic Under-Reporting of Bank Risk

We show that banks significantly under-report the risk in their trading book when they have lower equity capital. Specifically, a decrease in a bank's equity capital results in substantially more violations of its self-reported risk levels in the following quarter. The under-reporting is especially high during the critical periods of high systemic risk and for banks with larger trading operations. We exploit a discontinuity in the expected benefit of under-reporting present in Basel regulations to provide further support for a causal link between capital-saving incentives and under-reporting. Overall, we show that banks' self-reported risk measures become least informative precisely when they matter the most.http://deepblue.lib.umich.edu/bitstream/2027.42/109751/1/1260_Purnanandam.pdfhttp://deepblue.lib.umich.edu/bitstream/2027.42/109751/4/1260_Purnanandam_Apr2015.pdfhttp://deepblue.lib.umich.edu/bitstream/2027.42/109751/6/1260_Purnanandam_March2016.pdfhttp://deepblue.lib.umich.edu/bitstream/2027.42/109751/8/1260_Purnanandam_Sept2016.pdfhttp://deepblue.lib.umich.edu/bitstream/2027.42/109751/10/1260_Purnanandam_Sept2016_2.pdfDescription of 1260_Purnanandam_Sept2016.pdf : September 2016 revisionDescription of 1260_Purnanandam_March2016.pdf : March 2016 revisionDescription of 1260_Purnanandam_Apr2015.pdf : April 2015 revisionDescription of 1260_Purnanandam_Sept2016_2.pdf : September 2016 revision (new