| Abstract | The effective assets pricing is based on the disclosure of risk factors. This paper studies the relationship between the risk disclosure and IPO efficiency under the Chinese IPO prospectuses. We firstly find, after controlling relevant variables, more total risks, financial risks and operational risks disclosure will reduce IPO underpricing and boost liquidity. Secondly, companies with poor future performances have stronger willingness to reveal information, as a result of avoiding the regulation penalties and lawsuits following with the on-going earnings falling down，rather than being more honest or wiser instead. Thirdly, with the credit lack in securities market, honest disclosures will get more reward with lower IPO underpricing and more liquidity. Another important contribution of this paper is that, instead of indirect measurements of risks by keywords searching and counting by computers, we set up a kind of new measure way of real reading the risk information and judging by people. And in robust test, we innovatively created the “Fog-index” to measure the risk. The conclusions of this paper are benefit for improving information disclosure level in China in terms of theory and practice. |