IPO Game Analysis Of The Risk Factors Disclosure

In recent years, the cases of deliberately withholding and omission informationon the risk factors took place frequently in IPO market, infringing on the interests ofinvestors, especially small investors’, weakening the stock market function ofresources configuration. Based on the research of issuer’ motivation for riskinformation disclosure, the basic idea is: firstly, abstract our country’s particularsystem of IPO, construct the model of incomplete information dynamic game aboutrisk information disclosure participated by issuers, regulators and investors; secondly,select IPO fraud cases publicly punished by the SFC in china IPO market as samples,conduct empirical analysis for the game model. At last, put forward correspondingpolicy for the problem of the IPO market.It was found from game model that there was only non-equilibrium or separatedequilibrium state between low-risk issuers and high-risk issuers about risk informationdisclosure in IPO. High enough potential penalties costs is a effective deterrent forhigh-risk issuer to disclosure risk information, and conducive to the realization ofseparating equilibrium. If the afterwards supervision is high enough, the supervisoryobjectives could be achieved only by afterwards supervision. High standards of IPOneed to match with severe penalties. Shelf offering system helps to constraint issuers’behavior of disclosure information.In the empirical part of this paper, we made statistical analysis for high-riskissuers’ quality of risk information disclosure in IPO market, and found that ahigh-risk issuer imitated the low-risk issuer to disclosure risk factors and conductmixed equilibrium. However, the game model concluded that low-risk issuers andhigh-risk issuers could not form a mixed equilibrium. Analysed the regulatorsbehavior, we found that due to regulatory penalties too light, high-risk issuers ignoredregulatory penalties cost, and high-risk corporate utility function confused withlow-risk enterprise’s, so in reality a high-risk issuer imitated a low-risk issuer to forma mixed equilibrium. This explains the discrepancy between game model and thereality. If the pre-litigation procedure and forms of civil litigation restrictions wereabolished, and gave full play to the investors’ enthusiasm of obtain compensation, thehigh-risk issuer‘s potential costs to imitate the low-risk issuer would substantialincrease, and form separated equilibrium.