Do investors turn a blind eye to risk-factor disclosures by state-supported firms?

•How do investors respond to risk-factor disclosures in IPO prospectuses in China?•It is ex-ante unclear whether investors predominantly account for the implicit insurance when responding to IPOs’ risk disclosure.•State-offered implicit insurance weakens investor responses to risk disclosures.•Simply increasing disclosure transparency may not mitigate the IPO underpricing in a government-dominated economy.