Efficiency in initial public offerings and intellectual capital disclosure

The returns of initial public offerings (IPOs) on the first trading day, or the underpricing of IPOs, are a puzzle according to the Efficient Market Hypothesis. Many studies have attempted to relate these returns to different variables. We studied the relationship between underpricing and information about intellectual capital (IC), source of competitive advantage, disclosed in IPO prospectuses as well as other control variables. Our conclusion is contrary to certain literature, as IC information does not have any influence on underpricing but is consistent with the semi-strong efficient market hypothesis defended by Eugene Fama (Nobel in Economics 2013).