• Initial public offerings;
  • Long-run performance;
  • China stock market;
  • Signaling hypothesis;
  • Divergence of opinion hypothesis
  • G15;
  • G32


This study examines the long-run performance of 936 Chinese initial public offerings (IPOs) over the period 1996 to 2005 (the post-issue return evidence ends in June 2008). Using a number of empirical methods, including event-time and calendar-time approaches based on a size and industry matching firm benchmark, we find a significant long-run overperformance using the equal-weighted buy-and-hold abnormal returns, although not for the value-weighted returns, suggesting that the performance of small-size IPO firms is superior to that of large-size IPO firms. The significant overperformance disappears, however, when using cumulative or calendar-time abnormal returns. The preset study provides out-of-sample evidence in an emerging market context in support of Fama's (1998) argument that reported long-run performance is sensitive to the method of analysis. Finally, based on a rich set of explanatory factors as proxies for both signaling and ex-ante uncertainty characteristics, our results are supportive of the signaling hypothesis, but inconsistent with the divergence of opinion hypothesis.