Going-concern initial public offerings

We study the relation between audit reports and the capital-raising activit ies of small business by studying the role of going-concern (GC) audit opin ions in IPOs. After controlling for other effects, we find that the presenc e of a GC opinion is positively related to whether a stock delists (for del eterious reasons) within two years of IPO. We also find that GC IPOs suffer less first-day underpricing. Based on Rock (1986), this implies that firms with GCs have less ex ante uncertainty in the sense that the information c onveyed by a GC helps uninformed investors estimate the dispersion of secon dary market values. (C) 2001 Elsevier Science B.V. All rights reserved.