Intellectual Capital disclosure in IPOs: is it worth it?

We study the association between Intellectual Capital (IC) disclosure and IPO results for a sample of firms that have listed on the Italian stock market. By making use of an in-depth content analysis of the non-financial information disclosed in the listing prospectus, we disentangle the effects of such a disclosure on the underpricing from those effects that are produced on the price adjustment. Our empirical findings suggest an overall positive effect of the IC disclosure on IPO results as the increase in the underpricing, documented by previous literature as an opportunity cost, is preceded by an upward adjustment of the offer price, which means that more money was raised. Moreover, we provide evidence that primary and secondary market investors appreciate non-financial information in different ways. Our results encourage firms that are going public to definitely engage in disclosure of IC as a means to improve IPO results.