People have the power: post IPO effects of intellectual capital disclosure

We study the effects of disclosure practices regarding non-financial information in Initial Public Offering (IPO) prospectuses on the post IPO stock performance. Previous literature is in short supply of evidences regarding the effect of Intellectual Capital (IC) disclosure on the long-run IPO performance and it also provides inconsistent results, possibly due to the different IC classifications that are employed and to a variety of omitted concurrent factors which could befog the effect of the IC disclosure. In this paper, we disengage from any ready-made classification of IC and we shed light on the effects that unbiased IC information exert on the post IPO stock performance. In particular, we consider all the IC information that is provided in the listing prospectus of a sample of firms recently listed on Borsa Italiana by considering a series of 87 variables, as suggested by (Cordazzo J Intellect Cap 8(2):288-305, 2007) and we apply a principal component analysis to such information thus overcoming the subjectivity of any possible classification. The revealed IC components are then included in a multivariate analysis explaining the long-term IPO stock performance. We also include a wide set of variables to control for the short-term performance, the quality of the firm and other factors which could blur the effect of IC disclosure on the long run performance. Our empirical evidences show that information regarding the human resources and the information technology activities disclosed in the IPO prospectus continue to exert their positive effect on the behavior of secondary market investors in the 12 months that follow the IPO. Moreover, the information regarding the human resources is positively linked to the 36 months’ performance as well. Such a result underlines the key role that people have in the perception of a firm’s value in the IPOs setting, thus confirming that human resources are recognized as being very important contributors to the competitive advantage of corporations.