Different strokes: IPO risk factors, investor valuation, and firm survival

As a firm prepares for initial public offering, the Securities and Exchange Commission mandates that top managers must record risks to their firms' survival or performance in the prospectus. More specifically we propose that external risk factors (market risks, legal risks, and government regulations risks) have a more negative effect on investor optimism and initial public offering valuation, while internal risk factors (management risks, operational risks, technical risks) have a more negative effect on post-initial public offering long-term firm survival. This study illustrates a major gap between risk factors that investors initially focus on and the true determinants of long-term success.