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 efects of the new regulation on gatekeepers, such as underwriters and auditors who are commonly qualifed as information intermediaries. We analyse the efects on average underpricing, fees charged by the underwriters, syndicate composition and reputation, and auditor participation. Although we fnd only weak statistical evidence that the level of underpricing has increased after April 2007, there is a statistically signifcant 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 fnance · IPO · Prospectus liability · Strict liability · Negligence · Securities litigation risk · Underpricing · Responsabile del collocamento · Gatekeepers · Informational intermediaries · Underwriters · Reputation · Auditors · Lawsuit avoidance hypothesis · Underwriting fees