Advertisement

Prospectus Liability and the Role of Gatekeepers as Informational Intermediaries: An Empirical Analysis of the Impact of the Statutory Provisions on Italian IPOs

  • Dmitri Boreiko
  • Stefano LombardoEmail author
Article
  • 15 Downloads

Abstract

This article analyzes market reaction to the introduction into Italian legislation of a statutory system of (IPO) prospectus civil liability enacted in April 2007 on the basis of Directive 2003/71/EC. In particular, we study the effects of the new regulation on gatekeepers, such as underwriters and auditors who are commonly qualified as information intermediaries. We analyse the effects on average underpricing, fees charged by the underwriters, syndicate composition and reputation, and auditor participation. Although we find only weak statistical evidence that the level of underpricing has increased after April 2007, there is a statistically significant tendency to have one of the Big Four auditors in post-April 2007 IPOs, with lower participation of international banks in syndication and sharing of prospectus liability. Moreover, after April 2007 we observe an increase in the reputation of the underwriters acting as responsabile del collocamento with lower underwriters’ fees charged.

Keywords

Law and finance IPO Prospectus liability Strict liability Negligence Securities litigation risk Underpricing Responsabile del collocamento Gatekeepers Informational intermediaries Underwriters Reputation Auditors Lawsuit avoidance hypothesis Underwriting fees 

Notes

Acknowledgements

We thank Paolo Giudici, Federico M. Mucciarelli and Mathias Siems for helpful suggestions and comments on a previous version of this article. We also thank the anonymous referee. We remain of course solely responsible for the content of this article.

References

  1. Afferni G (2011) Responsabilità da prospetto: natura, danno risarcibile e nesso di causalità. Danno e responsabilità 625–632Google Scholar
  2. Afferni G (2013) Recenti sviluppi nell’azione di classe. Contratto e impresa 29:1275–1292Google Scholar
  3. Alexander JC (1993) The lawsuit avoidance theory of why initial public offerings are underpriced. Univ Calif Law Rev 41:17–73Google Scholar
  4. Anelli A (2010) La responsabilità da prospetto fra novità legislative e sentenze della Suprema Corte. Le Società 30:414–430Google Scholar
  5. Angelici C (2010) Su mercato finanziario, amministratori e responsabilità. Rivista del diritto commerciale 108:1–65Google Scholar
  6. Armour J, Hsu A, Walters A (2008) Corporate insolvency in the United Kingdom: the impact of the Enterprise Act 2002. Eur Co Financ Law Rev 5:148–171Google Scholar
  7. Booth JR, Smith RL (1986) Capital Raising, underwriting and the certification hypothesis. J Financ Econ 15:261–281CrossRefGoogle Scholar
  8. Boreiko B, Lombardo S (2011) Italian IPOs: allocations and claw back clauses. J Int Financ Mark Inst Money 21:127–143CrossRefGoogle Scholar
  9. Boreiko D, Lombardo S (2013) Lockup clauses in Italian IPOs. Appl Financ Econ 23:221–232CrossRefGoogle Scholar
  10. Bruno S (2008) La (nuova?) responsabilità da prospetto verso il pubblico. Banca borsa titoli di credito 61:I/785–I/797Google Scholar
  11. Chen H-C, Ritter JR (2000) The seven percent solution. J Financ 55:1105–1131CrossRefGoogle Scholar
  12. Chicchinelli S (2014) La fattispecie della responsabilità da prospetto informativo. Problemi e prospettive. Rivista del diritto societario 216–229Google Scholar
  13. Choi S (1998) Market lessons for gatekeepers. Northwest Univ Law Rev 92:916–966Google Scholar
  14. Coffee JC Jr (1984) Market failure and the economic case for a mandatory disclosure system. Va Law Rev 70:717–753CrossRefGoogle Scholar
  15. Coffee JC Jr (2007) Law and the market: the impact of enforcement. Univ Pa Law Rev 156:230–311Google Scholar
  16. Cooter R, Ulen T (2000) Law and economics. Addison Wesley Longman, AmsterdamGoogle Scholar
  17. Cox JD, Hilmann RW, Langewort DC (2013) Securities regulation. Cases and materials. Wolters Kluwer, New YorkGoogle Scholar
  18. De Jong BJ (2011) Liability for misrepresentation—European lessons on causation from the Netherlands. Eur Co Financ Law Rev 8:352–375Google Scholar
  19. Easterbrook FH, Fischel DR (1984) Mandatory disclosure and the protection of investors. Va Law Rev 70:669–715CrossRefGoogle Scholar
  20. Facci G (2009) Il danno da informazione finanziaria inesatta. Zanichelli, BolognaGoogle Scholar
  21. Ferrarini G (1986) La responsabilità da prospetto. Giuffrè, MilanGoogle Scholar
  22. Ferrarini G (1987) La Responsabilità da prospetto delle banche. Banca borsa titoli di credito 40:I/437–I/483Google Scholar
  23. Ferrarini G (1988) Investment banking, prospetti falsi e culpa in contrahendo. Giurisprudenza commerciale 15:II/585–II/608Google Scholar
  24. Ferrarini G, Giudici P (2005) Financial scandals and the role of private enforcement: the Parmalat case. ECGI Law Working Paper No 40/2005. https://ecgi.global/sites/default/files/working_papers/documents/SSRN-id730403.pdf. Accessed 10 Dec 2018
  25. Ferrell A, Roper A (2015) Price impact, materiality and Halliburton II. Washington Univ Law Rev 93:553–582Google Scholar
  26. Ferres SP, Hiller JS, Wolfe GA, Cooperman ES (1992) An analysis and recommendation for prestigious underwriter participation in IPOs. J Corp Law 17:581–603Google Scholar
  27. Fioruzzi P, De Nardis ES, Puppieni NB (2012) Art. 94 Prospetto d’offerta. In: Fratini M, Gasparri G (eds) Il Testo Unico della Finanza, tomo II. Utet, Turin, pp 1057–1087Google Scholar
  28. Fox MB (1984) Shelf registration, integrated disclosure, and underwriter due diligence: an economic analysis. Va Law Rev 70:1005–1034CrossRefGoogle Scholar
  29. Fox MB (1999) Retaining mandatory securities disclosure: why issuer choice is not investor empowerment. Va Law Rev 85:1335–1419CrossRefGoogle Scholar
  30. Fox MB (2016) Regulating public offerings of truly new securities: first principles. Duke Law J 66:673–727Google Scholar
  31. Gardella A (2011) La frode Madoff non sfugge alla giurisdizione italiana: responsabilità transfrontaliera prospetto e responsabilità della prima. Banca borsa titoli di credito 64:II/706–II/719Google Scholar
  32. Gerner-Beuerle C (2009a) The market for securities and its regulation through gatekeepers. Temple Int Comp Law J 24:317–377Google Scholar
  33. Gerner-Beuerle C (2009b) Underwriters, auditors, and other usual suspects: elements of third party enforcement in US and European securities law. Eur Co Financ Law Rev 6:476–515Google Scholar
  34. Gerner-Beuerle C (2012) United in diversity. Maximum vs. minimum harmonisation in EU securities regulation. Cap Mark Law J 7:317–342CrossRefGoogle Scholar
  35. Gilson RJ, Kraakman RH (1984) The mechanisms of market efficiency. Va Law Rev 70:549–644CrossRefGoogle Scholar
  36. Giudici P (2008) La responsabilità civile nel diritto dei mercati finanziari. Giuffrè, MilanGoogle Scholar
  37. Giudici P (2009) Il ‘private enforcement’ nel diritto dei mercati finanziari. In: Maugeri M, Zoppini A (eds) Funzioni del diritto private e tecniche di regolazione del mercato. Il Mulino, Bologna, pp 293–324Google Scholar
  38. Giudici P (2011) L’azione di classe e la responsabilità civile nel diritto dei mercati finanziari. AAVV, Class action: il nuovo volto della tutela collettiva in Italia. Giuffrè, Milan, pp 191–208Google Scholar
  39. Giudici P (2012) Auditors’ multi-layered liability regime. Eur Bus Organ Law Rev 13:501–555CrossRefGoogle Scholar
  40. Giudici P (2014a) L’appello al pubblico risparmio e i contratti: IPO; contratto di collocamento; prospetto. In: Benedetti AM, Roppo V (eds) Trattato dei contratti, V Mercati regolati. Giuffrè, Milan, pp 965–989Google Scholar
  41. Giudici P (2014b) Le offerte degli emittenti: determinazione dei prezzi e altre clausole contrattuali. I contratti con i gatekeepers. In: Benedetti AM, Roppo V (eds) Trattato dei contratti, V Mercati regolati. Giuffrè, Milan, pp 991–1018Google Scholar
  42. Giudici P, Lombardo S (2012) La tutela degli investitori nelle IPO con prezzo di vendita aperto. Rivista delle Società 57:907–942Google Scholar
  43. Hamann H (2014) Evidenzbasierte Jurisprudenz. Mohr Siebeck, TübingenGoogle Scholar
  44. Hanley KW, Hoberg G (2009) Litigation risk, strategic disclosure and the underpricing of initial public offerings. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1500571. Accessed 5 Oct 2018
  45. Hanley KW, Hoberg G (2010) The information content of IPO prospectus. Rev of Financ Stud 23:2821–2864CrossRefGoogle Scholar
  46. Heil B, Lee B (2016) The role of private litigation. University of Pennsylvania Law School. https://scholarship.law.upenn.edu/fisch_2016/7/. Accessed 5 October 2018
  47. Hopt KJ, Voigt H-C (eds) (2005) Prospekt- und Kapitalmarktinformationshaftung. Mohr Siebeck, TübingenGoogle Scholar
  48. Hughes PJ, Thakor AV (1992) Litigation risk, intermediation, and the underpricing of initial public offerings. Rev Financ Stud 5:709–742CrossRefGoogle Scholar
  49. Iacumin L (2015) Azione di classe e tutela degli azionisti. Giurisprudenza Italiana 91-95Google Scholar
  50. Jaeger PG (1986) Appunti sulla responsabilità da prospetto. Quadrimestre 283–288Google Scholar
  51. Katelouzou D, Siems M (2015) Disappearing paradigms in shareholder protection: leximetric evidence for 30 countries, 1990–2013. J Co Law Stud 15:127–160Google Scholar
  52. Kraakman RH (1986) Gatekeepers: the anatomy of a third-party enforcement strategy. J Law Econ Organ 2:53–104Google Scholar
  53. La Porta R, Lopez-de-Silanes F, Shleifer A, Vishny RV (1997) Legal determinants of external finance. J Financ 52:1131–1150CrossRefGoogle Scholar
  54. La Porta R, Lopez-de-Silanes F, Shleifer A, Vishny RV (1998) Law and finance. J Political Econ 106:1113–1155CrossRefGoogle Scholar
  55. La Porta R, Lopez-de-Silanes F, Shleifer A (2006) What works in securities Law? J Financ 61:1–33CrossRefGoogle Scholar
  56. La Porta R, Lopez-de-Silanes F, Shleifer A (2008) The economic consequences of legal origins. J Econ Lit 46:285–332CrossRefGoogle Scholar
  57. Lin HL, Pukthuanthong K, Walker TJ (2013) An international look at the lawsuit avoidance hypothesis of IPO underpricing. J Corp Financ 19:56–77CrossRefGoogle Scholar
  58. Lunghini G (2012) Art. 173-bis Falso in prospetto. In: Fratini M, Gasparri G (eds) Il Testo Unico della Finanza, tomo II. Utet, Turin, pp 2292–2302Google Scholar
  59. Macchiavello E (2009a) La responsabilità da prospetto degli intermediari finanziari tra passato, presente e futuro. Contratto e impresa 25:911–942Google Scholar
  60. Macchiavello E (2009b) La responsabilità da prospetto degli intermediari finanziari. In: Visentini G (ed) Trattato della responsabilità Contrattuale, vol II. I singoli contratti. Cedam, Padova, pp 793–830Google Scholar
  61. Nuzzo A (2002) Note sulla responsabilità dello sponsor. Analisi giuridica dell’economia 1:269–293Google Scholar
  62. Partony F (2001) Barbarians at the gatekeepers?: A proposal for a modified strict liability regime. Washington Univ Law Q 79:491–547Google Scholar
  63. Perrone A (2002) Falsità da prospetto e responsabilità civile della Consob. Banca borsa titoli di credito 55:II/10–II/29Google Scholar
  64. Perrone A (2003) Informazione al mercato e tutele dell’investitore. Giuffrè, MilanGoogle Scholar
  65. Poelzig D (2015) Private enforcement im deutschen und europäischen Kapitalmarktrecht. Zeitschrift für Unternehmens- und Gesellschaftsrecht 44:801–848CrossRefGoogle Scholar
  66. Portale GB (1982) Informazione societaria e responsabilità degli intermediari. Banca borsa titoli di credito 35:I/3–I/31Google Scholar
  67. Poto M (2009) Responsabilità della Consob: ancora irrisolto il problema relativo all’elemento soggettivo. Responsabilità civile e previdenza 1798–1807Google Scholar
  68. Ramsay IM, Sidhu BK (1995) Underpricing of initial public offerings and due diligence costs: an empirical investigation. Co Secur Law J 13:186–201Google Scholar
  69. Rizzuti M (2011) Responsabilità da prospetti e culpa in contraendo. Giurisprudenza italiana 289–291Google Scholar
  70. Romano R (1998) Empowering investors: a market approach to securities regulation. Yale Law Journal 107:2359–2430CrossRefGoogle Scholar
  71. Sartori F (2011) La responsabilità da prospetto informativo. Rivista di diritto bancario 1–20Google Scholar
  72. Schammo P (2011) EU prospectus law. Cambridge University Press, CambridgeCrossRefGoogle Scholar
  73. Scribano F (2015a) The impact of third-party certification on Italian initial public offerings. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2571247. Accessed 5 Oct 2018
  74. Scribano F (2015b) Lending relationship and the role of the underwriter: evidence from Italian IPOs. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2573598. Accessed 5 Oct 2018
  75. Shavell S (2007) Economic analysis of accident law. Harvard University Press, HarvardGoogle Scholar
  76. Sher N (2006a) Underwriters’ civil liability for IPOs: an economic analysis. Univ Pa J Int Econ Law 27:389–464Google Scholar
  77. Sher N (2006b) Negligence versus strict liability: the case of underwriters liability in IPOs. DePaul Bus Commer Law J 4:451–496Google Scholar
  78. Spindler G, Gerdemann S (2016) Rechtstatasachenforschung. Grundlagen. Entwicklung und Potentiale. Die Aktiengesellschaft 61:698–703Google Scholar
  79. Tiniç SM (1988) Anatomy of initial public offering of common stock. J Financ 43:798–822CrossRefGoogle Scholar
  80. Ventoruzzo M (2003) La Responsabilità da prospetto negli Stati Uniti d’America tra regole di mercato e mercato delle regole. Egea, MilanGoogle Scholar
  81. Violante U (2004) La responsabilità parziaria. ESI, NaplesGoogle Scholar
  82. Wundenberg M (2015) Perspektiven der privaten Durchsetzung im europäischen Kapitalmarktrecht. Zeitschrift für das Unternehmens- und Gesellschaftsrecht 44:124–160Google Scholar
  83. Zanardo A (2012) La Suprema Corte si pronuncia sulla responsabilità ‘da prospetto’. La Responsabilità civile 804–810Google Scholar

Copyright information

© T.M.C. Asser Press 2019

Authors and Affiliations

  1. 1.Assistant Professor of Corporate Finance, Faculty of Economics and ManagementFree University of Bozen/BolzanoBolzanoItaly
  2. 2.Associate Professor of Economic Law, Faculty of Economics and ManagementFree University of Bozen/BolzanoBolzanoItaly

Personalised recommendations