Pre-Prospectus Disclosure and Firm Visibility: Evidence from Private Firms Pursuing an Initial Public Offering

53 Pages Posted: 2 Aug 2018 Last revised: 10 Jan 2019

See all articles by Michael Dambra

Michael Dambra

SUNY at Buffalo - School of Management

Bryce Schonberger

University of Rochester - Simon Business School

Charles E. Wasley

Simon School, University of Rochester

Date Written: January 1, 2019

Abstract

We develop predictions for the benefits of voluntary disclosures made prior to filing any regulated financial information via a prospectus by firms pursuing an initial public offering (IPO). We draw on existing disclosure literature and predictions by Merton (1987) regarding the benefits to firms of enhancing visibility with prospective investors. For a sample of IPOs from 2004 – 2016 we find that pre-prospectus press release disclosures are common and positively associated with pre-IPO capital raising, intangible asset investment, and retaining a prestigious underwriter. Consistent with Merton (1987), we find that pre-prospectus disclosures are positively associated with EDGAR search activity by prospective investors, IPO pricing, and post-IPO improvements in firm visibility. On the other hand, such disclosures have little discernible effect on adverse selection costs following the offering, suggesting that pre-prospectus voluntary disclosures benefit firms by enhancing visibility, but not by mitigating informational asymmetries.

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

JEL Classification: M4, G14, G32

Suggested Citation

Dambra, Michael and Schonberger, Bryce and Wasley, Charles E., Pre-Prospectus Disclosure and Firm Visibility: Evidence from Private Firms Pursuing an Initial Public Offering (January 1, 2019). 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 )

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

Bryce Schonberger (Contact Author)

University of Rochester - Simon Business School ( email )

Rochester, NY 14627
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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