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Research Question/Issue: What is the relationship between governance, tone in language, and underpricing of initial public offerings (IPOs) in Latin America?Research Findings/Insights: We find a positive (negative) and statistically significant relationship between board size (board independence) and IPO underpricing at the time firms go public. But more importantly, when interacting with corporate governance variables at the firm level, uncertainty in tone still shows statistical significance, which suggests that tone in communications matters for underpricing independently of governance provisions at the firm level.Theoretical/Academic Implications: Bigger boards seem to lead to greater underpricing, whereas more independent boards mitigate it. This finding stresses the relevance of functional convergence in regions with weak institutions such as Latin America. Our results also suggest that tone matters for underpricing even in firms with good governance practices. We argue that tone in corporate communications is a strong signaling mechanism for market participants.Practitioner/Policy Implications: Our results suggest that tone in firms' communications is relevant for market valuation. In the context of family firms in an underresearched context such as Latin America, we show that reputation effect is priced by the market valuation of the IPO.

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PurposeThe purpose of this study is to estimate the effect of information disclosure on firm value for firms in the Integrated Latin American Market (MILA) over the period 2011–2017.Design/methodology/approachThe study uses structural equation modeling (SEM), where the latent variable “Disclosure Quality” is measured using five textual analysis variables as indicators. The final sample is composed of 1,412 observations representing 198 firms from which we were able to collect annual reports and financial information required.FindingsThe authors find a positive and statistically significant effect of “Disclosure Quality” on firm value. The indirect effect of language on firm value is also captured. Text similarity, negative tone, readability and text length in corporate disclosure are negatively related to firm value while using positive tone is positively related. In the exploratory analysis, the authors have significant effects of textual measures on disclosure quality.Originality/valueThe research is original and unique as it approaches the relation between disclosure quality and market valuation of the firm using SEM for firms participating in the MILA.