Do Risk Factors Matter in the IPO Valuation?
Journal of Financial Regulation and Compliance, Vol. 15, No. 1, pp. 63-89, 2007
45 Pages Posted: 10 Apr 2007 Last revised: 11 May 2009
The paper investigates whether all of the risk factors priced during the Internet bubble period. To answer this question, we use a unique hand collected dataset from public prospectuses for companies that issued an initial public offering during the Internet bubble period. We propose three hypotheses: 1- The risk factors mentioned in the prospectus are important for IPO trading and therefore affect IPO underpricing, 2- Risk factors affect the IPO deal attributes, and 3- The number of risk factors cited by the issuing firm is affected by direct participants such as venture capitalists and investment bankers.
Keywords: Risk Factors, IPOs, Underpricing, Internet Bubble
JEL Classification: G32, G24, G14
Suggested Citation: Suggested Citation