Initial public offering underpricing — Analysis from a risk disclosure perspective

Initial public offerings have generally been underpriced in the short term. In the primary stock market of China, the phenomenon of severe underpricing has remained a problem for most of the time. This paper made an empirical study of the IPO underpricing in China from a risk factors disclosure perspective. Using IPO data from 2004–2011, we found significant relationship between these risk measures and initial returns. Our results support the view that companies should make not only fully but also meaningful disclosures in the IPO prospectuses.