Forward-looking Disclosure and IPO Underpricing: Evidence From Euronext Paris

This study investigates the effect of forward-looking disclosure (FLD) on IPO underpricing in the Euronext stock market by assessing the informational content of both quantitative and qualitative FLD in IPO prospectuses. Using a content analysis approach to construct qualitative FLD variables, our findings indicate that a higher level of narrative forward-looking information disclosed in the prospectus is associated with reduced IPO underpricing. The stock market appears more responsive to narrative FLD when it is supported by simultaneously disclosed quantitative information, which enhances its verifiability. Furthermore, we find that risk-related disclosures significantly mitigate IPO underpricing. By analyzing the tone of disclosures, our results reveal a complementary effect between quantitative and qualitative FLD on IPO underpricing, particularly when disclosures are framed in an optimistic and confident tone. Introducing a new measure for FLD, this study provides new empirical evidence on the informational content of qualitative FLD in the IPO prospectus. These findings offer important theoretical and practical implications for regulators, investors, and issuing firms’ managers.