Risk Disclosure and IPO Underpricing: an empirical analysis of the impact of EU Regulation 2017/1129

This thesis examines the risk disclosure in admission prospectuses of Initial Public Offerings (IPOs) to assess the quality, completeness, and transparency of risk factors disclosed by companies seeking to go public. Using a sample of Italian IPO prospectuses, the research explores the relationship between the characteristics of risk disclosure and underpricing, which is the first day market return of new shares and, in academic literature, a proxy for asymmetrical information. Moreover, the thesis investigates if the regulatory implementations on risk disclosure introduced by EU Regulation 2017/1129 have been effective in improving the informativeness, reducing information asymmetries and, in turn, the level of underpricing. Data is collected through a content analysis of the “Risk factors” section within IPO prospectuses. Results did not highlight improvements in this direction, as the risk disclosure (pre- and post-Regulation) did not significantly influence underpricing.