Underpricing and voluntary disclosure: The case of mining IPOs in Australia

Abstract

We study the extent to which voluntary disclosure of information in IPO prospectuses of mining companies is associated with lower IPO underpricing. We study the disclosure of information at IPO, looking at the IPO prospectus which is the fundamental document providing investors with information about the company. While its format and main contents are largely fixed by law, there is considerable scope for voluntary disclosure. Mining is a highly capital intensive endeavor and access to equity capital is a key requirement for the development of a mine. We find that the quality of information disclosure, as well as the characteristics of the mining companies, indeed affects underpricing.