THE PERFORMANCE AND LONG-RUN CHARACTERISTICS OF THE CHINESE IPO MARKET

Authors


* Address for correspondence: Department of Finance, Banking and Property, Massey University, Private Bag 11-222, Palmerston North, New Zealand. Email: j.chi@massey.ac.nz. We would like to thank Professor Chris Brooks, Professor Martin Young, Dr Pinghsun Huang and anonymous referees for their valuable comments and suggestions. We wish to acknowledge data support from China Shenzhen GTA (Guo Tai An) Information Technology Co. Ltd. All errors are our responsibility.

Abstract

Abstract.  We study the short-run and long-run performance of 340 and 409 IPOs, respectively, listed on China's two exchanges from 1996 to 1997. We find that the average underpricing is 127.3%, and that the average market-adjusted cumulative return and buy-and-hold return over the three years after listing are 10.3% and 10.7%, respectively, which are both significantly positive at the 5% level. We then use a cross-sectional analysis to explain the long-run out-performance of Chinese IPOs, and find that firms with lower government ownership, smaller offering sizes, high-tech features and lower initial returns perform better in the long-run.

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