The impact of risk factor disclosure on the initial return of IPO companies amidst a pandemic

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The capital market has increasingly become a pivotal avenue for enterprises seeking additional capital for expansion or operational enhancements. In raising funds through an Initial Public Offering (IPO), the company must publish its risk disclosure in the prospectus. Therefore, this study aims to investigate the impact of risk disclosure on the initial return of Indonesian companies undergoing IPOs during the pandemic. Using data from 136 out of 164 companies that went public between 2020 and 2022, sourced from the Indonesian Stock Exchange and company websites, the study employs the ordinary least squares method to estimate the impact of risk disclosures on initial returns during the pandemic. The findings reveal that external and overall risk disclosures significantly influence IPO initial returns. Specifically, Indonesian investors were particularly attentive to external and overall risks when evaluating IPOs during the pandemic. This heightened concern suggests that comprehensive risk disclosure can affect investor behavior and financial outcomes for companies going public in uncertain times, highlighting the importance of transparency in risk communication to support investor decision-making and market stability.

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    • Table 1. Sample criteria
    • Table 2. Description of data
    • Table 3. Analysis of correlation
    • Table 4. Result of estimation
    • Conceptualization
      Ghazali Syamni, Rafidah Othman, Murhaban Murhaban, Muhammad Rizal, M. Shabri Abd. Majid
    • Data curation
      Ghazali Syamni, Murhaban Murhaban, Rico Nur Ilham, M. Shabri Abd. Majid
    • Formal Analysis
      Ghazali Syamni, Rafidah Othman, Murhaban Murhaban, Rico Nur Ilham, Muhammad Rizal, M. Shabri Abd. Majid
    • Funding acquisition
      Ghazali Syamni, Rafidah Othman, Rico Nur Ilham
    • Investigation
      Ghazali Syamni, Rafidah Othman, Muhammad Rizal, M. Shabri Abd. Majid
    • Methodology
      Ghazali Syamni, Rico Nur Ilham, Muhammad Rizal, M. Shabri Abd. Majid
    • Supervision
      Ghazali Syamni, Rafidah Othman, Murhaban Murhaban, Muhammad Rizal, M. Shabri Abd. Majid
    • Validation
      Ghazali Syamni, Rafidah Othman, Murhaban Murhaban, Muhammad Rizal, M. Shabri Abd. Majid
    • Visualization
      Ghazali Syamni, Rafidah Othman, Rico Nur Ilham, M. Shabri Abd. Majid
    • Writing – original draft
      Ghazali Syamni, Rafidah Othman, Murhaban Murhaban, Rico Nur Ilham, Muhammad Rizal, M. Shabri Abd. Majid
    • Writing – review & editing
      Ghazali Syamni, Rafidah Othman, Murhaban Murhaban, Rico Nur Ilham, Muhammad Rizal, M. Shabri Abd. Majid
    • Project administration
      Rafidah Othman, Murhaban Murhaban, Muhammad Rizal, M. Shabri Abd. Majid
    • Resources
      Murhaban Murhaban, Rico Nur Ilham
    • Software
      Rico Nur Ilham