Voluntary Disclosure and Firm Visibility: Evidence from Firms Pursuing an Initial Public Offering

Drawing on predictions by Merton (1987) regarding the benefits to firms of enhancing visibility with prospective investors, we develop hypotheses for the role of pre-prospectus voluntary disclosure activities in terms of press releases and attendance at investor and industry conferences by firms pursuing an initial public offering (IPO). For a sample of IPOs during 2004–2014 we find that press release disclosures and conference attendance are common pre-IPO disclosure strategies. Tests using the passage of the 2005 Securities Offering Reform as a source of quasi-exogenous variation in pre-prospectus disclosures reveal, consistent with Merton (1987), that disclosures in this regime appear designed to enhance firm visibility, but have little effect on the extent of adverse selection costs. Overall, our evidence suggests that pre-IPO voluntary disclosure strategies provide benefits to newly public firms beyond mitigating informational asymmetries