Creating Visibility: Voluntary Disclosure by Private Firms Pursuing an Initial Public Offering

56 Pages Posted: 2 Aug 2018 Last revised: 2 Jul 2021

See all articles by Michael Dambra

Michael Dambra

SUNY at Buffalo - School of Management

Bryce Schonberger

University of Colorado at Boulder - Leeds School of Business

Charles E. Wasley

Simon School, University of Rochester

Date Written: June 30, 2021

Abstract

We draw on Merton (1987) to develop predictions for the benefits of voluntary disclosures made by firms pursuing an initial public offering (IPO) prior to when they begin providing regulated financial information via their IPO prospectus. We find that voluntarily issuing press releases and attending investor and industry conferences prior to filing the IPO prospectus are common disclosure activities. Consistent with Merton (1987), we find that pre-prospectus disclosures are positively associated with information acquisition by prospective investors and coverage by information intermediaries during the IPO filing period. Consistent with these disclosures operating through a visibility channel, we find that while direct associations between pre-prospectus disclosures and IPO pricing and post-IPO adverse selection costs are limited, indirect effects operating through filing-period information acquisition by prospective investors are significant. Overall, our evidence suggests that pre-prospectus voluntary disclosures benefit firms by enhancing visibility with prospective investors and information intermediaries, which ultimately lead to improvements in firms’ information environments and in the pricing of the IPO.

Keywords: voluntary disclosure; initial public offering; press releases; conferences; investor awareness; visibility; information asymmetry

JEL Classification: M4, G14, G32

Suggested Citation

Dambra, Michael and Schonberger, Bryce and Wasley, Charles E., Creating Visibility: Voluntary Disclosure by Private Firms Pursuing an Initial Public Offering (June 30, 2021). Available at SSRN: https://ssrn.com/abstract=3213482 or http://dx.doi.org/10.2139/ssrn.3213482

Michael Dambra

SUNY at Buffalo - School of Management ( email )

350 Jacobs Management Center
Buffalo, NY 14260-1660
United States
716-645-3237 (Phone)

Bryce Schonberger (Contact Author)

University of Colorado at Boulder - Leeds School of Business ( email )

Boulder, CO 80309-0419
United States

Charles E. Wasley

Simon School, University of Rochester ( email )

Rochester, NY 14627
United States
585-275-3362 (Phone)
585-442-6323 (Fax)

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