Disaggregated Discretionary Disclosure and Future Operating Performance

Recent disclosure models predict that firms with more pessimistic private information about future operating performance will make more disaggregated discretionary disclosures. We use the IPO S-1 filing setting to address this question, arguing that this setting closely matches the theory models' disclosure and timing setup for several reasons. Consistent with theory, we find that higher S-1 disaggregated discretionary disclosure quantity is significantly associated with future operating performance declines. We also plausibly rule out alternative litigation, proprietary costs, and management obfuscation motives. Our focus on future operating performance complements past disclosure studies' focus on current and past operating performance