This paper was previously titled ‘Investor Sentiment, Governance Mechanisms and Post-IPO Performance in China’. We thank Robert Faff (the editor) and an anonymous referee for their helpful suggestions. We also thank Charles Shi, Anna Vong, Desmond Yuen and conference participants at the European Financial Management Association 2007 Annual Meeting at Vienna and the Seventh (2007) Accounting and Finance Conference at Xiamen University for valuable comments on our manuscript. All remaining errors are ours.
Cross-sectional determinants of post-IPO stock performance: evidence from China
Article first published online: 17 AUG 2010
© 2009 The Authors. Accounting and Finance © 2009 AFAANZ
Accounting & Finance
Volume 50, Issue 3, pages 581–603, September 2010
How to Cite
Chang, X., Lin, S. H., Tam, L. H. K. and Wong, G. (2010), Cross-sectional determinants of post-IPO stock performance: evidence from China. Accounting & Finance, 50: 581–603. doi: 10.1111/j.1467-629X.2009.00333.x
- Issue published online: 17 AUG 2010
- Article first published online: 17 AUG 2010
- Received 23 February 2009; accepted 3 October 2009 by Robert Faff (Editor).
This paper examines the cross-sectional determinants of post-IPO long-term stock returns in China. We document that the aftermarket P/E ratio has the most robust negative association with post-IPO stock returns. The negative relation indicates that the market corrects the aftermarket overvaluation of IPO firms in the long run. Underwriter reputation has a positive effect on post-IPO stock returns, while board size has a negative impact, consistent with the views that reputable underwriters mitigate the information asymmetry in IPO pricing and over-sized boards reduce the effectiveness of corporate governance. However, we find little evidence indicating that the equity ownership structure is significantly associated with post-IPO stock returns.