Download or read book Does IPO Underpricing in China Explain a Firm s Long Term Performance An Empirical Study of IPOs in China with Corporate Governance Perspectives written by Martin Hovey and published by . This book was released on 2009 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: In excess of 1,500 firms have listed publicly on the Shanghai and Shenzhen stock exchanges in China since 1990. With close to 20 years of unique IPO activity, China represents a rich source of data to explore the IPO aftermarket performance. The sample of this study includes 311 IPOs issued from 1999 to 2001. The period is studied because it was the most dynamic phase of IPO issues in the Chinese market in recent times after which the market subsequently became extremely volatile. The results of the study show that firms with higher initial IPO returns are valued more highly by investors, and are expected to provide superior returns in the long-run. The ownership structure has a bearing on the corporate governance of the firm and its objectives. Accordingly, the market in China values legal person and foreign ownership more than other forms of ownership and expect these to enhance performance long-term. Management ownership has a positive influence on performance as it related to State ownership, but not to legal person ownership. On the other hand, State ownership was negatively related to performance. The findings also show that the growth potential of a firm has a significant bearing on the long run performance of IPOs in China. Larger firms are considered more highly by the market in IPOs in China. A number of other variables, including aspects of corporate governance, are applied to the study and their results are reported.

Download or read book Ungerpricing sic and Long run Performance of Chinese IPOs written by Yuzhi Wang and published by . This book was released on 2005 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Empirical Evidence on IPO Underpricing written by Marius Hamer and published by GRIN Verlag. This book was released on 2007-06-20 with total page 72 pages. Available in PDF, EPUB and Kindle. Book excerpt: Diploma Thesis from the year 2007 in the subject Business economics - Investment and Finance, grade: 1,3, European Business School - International University Schloß Reichartshausen Oestrich-Winkel, language: English, abstract: This paper aims at establishing a link between the average level of initial return of IPO shares, existing underpricing explanations and the dot-com bubble. In years prior to the boom of the new economy, underpricing was explained by various theories, which have extensively been developed since decades. However, in the years 1998 to 2001 IPOs were overly underpriced, leading to assumptions about behavioural aspects and investor irrationality. Analysing a comprehensive dataset of 371 IPOs on the Frankfurter Börse between 1997 and 2007, this paper aims at providing evidence that the observed lower levels of initial returns in recent years can indeed be aligned with existing theories on the basis of rational behaviour of market participants. Firstly, the IPO process and its major participants will be presented followed by a review of relevant studies on the IPO phenomenon. In the next step, established underpricing theories are recapitulated. A descriptive analysis of the data sample points out the particularities concerning the company and transaction characteristics of the sample firms. In a last step, a regression analysis relates various proxies for information asymmetry to established underpricing theories. It gives reason to believe that the irrationality at the turn of the century has vanished and that underpricing can again be explained by established theories.

Download or read book An Empirical Investigation of Underpricing in Chinese Ipos written by Dongwei Su and published by . This book was released on 1997 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we empirically identify some of the causes of cross-sectional differences in underpricing of Chinese initial public offerings (IPOs) using data compiled for 308 firm-commitment A-share IPOs (available only to Chinese investors) and 57 B-share IPOs (available only to foreign investors). We first formulate and estimate a benchmark empirical model that relates IPO initial returns to variables widely used in studies of IPO underpricing. Then we test three hypotheses that may help explain the high A- share IPO underpricing in China. We find that IPO underpricing is the largest at the earliest stage of development of stock markets in China. The extraordinarily large IPO underpricing is at least partially due to a relatively small aggregate supply of shares. We also find that A-share IPO underpricing is better explained by a signaling model that relates IPO underpricing to subsequent seasoned equity offerings (SEOs) than by one linking government or employee ownership to equilibrium IPO underpricing. Issuers with larger IPO underpricing are more likely to raise larger amounts of capital through SEOs more quickly. The results support the notion that the primary purpose for Chinese firms going public is to raise capital, not to transfer ownership from state to private citizens. Moreover, we do not find any evidence that lottery mechanisms have contributed to the high IPO underpricing in China. Finally, we find some evidence that the difference in IPO underpricing among A and B shares can be explained by the differences in domestic and foreign investors' investment opportunities and investment sentiments.

Download or read book Does the Stock Market Boost Firm Innovation written by Hui He and published by International Monetary Fund. This book was released on 2017-06-30 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: The paper analyses the effect of the stock market on firm innovation through the lens of initial public offering (IPO) using uniquely matched Chinese firm-level data. We find that IPOs lead to an increase in both the quantity and quality of firm innovation activity. In addition, IPOs expand a firm’s scope of innovation beyond its core business. The impact of IPOs on firm innovation varies across financial constraints, corporate governance, and ownership structures. Our results further illustrate that IPOs induce a firm to increase the number of inventors and enable better retention of existing inventors after the IPO. Finally, we show that the enhanced innovation activity resulting from IPOs increases a firm’s Tobin’s Q in the long run.

Download or read book The Performance of Chinese IPOs Listed in Singapore written by Alexander Richter and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Within the global IPO market, the Asia-Pacific region has grown tremendously in importance. This paper examines the performance of Chinese IPOs listed on the Singapore Exchange (SGX), where they make up for a significant part of stock market activity. Although IPO performance has been an area of vast research, hardly any research has yet been conducted on the phenomenon of foreign listings. A sample of 103 Mainland Chinese companies that went public in Singapore between 2003 and 2013 is compared to the Singaporean overall market as well as to Chinese companies listed on the domestic stock exchanges in Shenzhen and Shanghai. Among these samples, consisting of a total of 1682 new issuances, differences are identified and possible explanations given. Models of information asymmetry and market sentiment are used to explain higher initial returns on Chinese companies as their offers are accompanied by a higher degree of uncertainty. The differences in MAIRs between Singapore and China also show that the SGX is a more efficient and sophisticated stock exchange. Based on the regressions, the author concludes that the difference in IPO underpricing between the particular samples can be explained by a variety of factors, which are sometimes hard to qualify. Furthermore, the empirical evidence indicates that Chinese companies significantly underperform the overall market in the long-run. This can be attributed to the decline in investor confidence, as investors start questioning the quality of these companies more strongly.

Download or read book Handbook of Research on IPOs written by Mario Levis and published by Edward Elgar Publishing. This book was released on 2013-11-29 with total page 599 pages. Available in PDF, EPUB and Kindle. Book excerpt: The chapters offer some important new insights into issues that will be of interest not only to the academic community but also to professionals involved in the preparation, structure and execution of such transactions, market regulators, and private a

Download or read book The Aftermarket Performance of Chinese IPOs written by Nuo Lai and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In this thesis, I study the phenomena of initial underpricing and long-run underperformance of initial public offerings (IPO) in the Chinese A-share market. After giving an overview on existing literature and the characteristics of the Chinese IPO market, I examine a sample consisting of 196 A-share IPOs issued on the Shanghai Stock Exchange (SSE) during 2002 and 2004 and find that the average market-adjusted initial underpricing is 93.89% and that the average market-adjusted cumulative return and buy-and-hold return over the three years after listing are -20.77% and -24.07%, respectively, which are both significantly negative at 1% level. I then use a cross-sectional analysis to explain the initial underpricing of Chinese IPOs, showing that issuing companies with smaller offer sizes, lower offer prices and higher profitability have higher initial underpricing. Chinese IPO investors are also facing the winner's curse problem. The cross-sectional analysis of long-run performance shows that companies with lower initial underpricing perform better in the long-run and that long-run performance mainly depends on the operating performance of the companies. Government ownership has no significant impact on initial underpricing and long-run performance of IPOs in my sample.

Download or read book Advances in Financial Economics written by Kose John and published by Emerald Group Publishing. This book was released on 2013-12-18 with total page 269 pages. Available in PDF, EPUB and Kindle. Book excerpt: Advances in Financial Economics Vol. 16 contains a set of empirical papers by a set of global scholars who examine corporate governance and market regulation from a variety of perspectives.

Download or read book The Effects of Split Shares Reform on IPO Underpricing in China written by Rantao Hua and published by . This book was released on 2014 with total page 198 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis examines the impact of the split shares reform on IPO underpricing in China. I compare the effects of the changes in regard to three aspects of the Chinese stock market: government intervention, corporate governance in listed firms and changes in external market circumstances on IPO underpricing between the pre-split shares reform (pre-SSR) period from 2002 to 2005 and the post-split shares reform (post-SSR) period from 2006 to 2011, in order to investigate the effect of split shares reform on the changes of the degree of IPO underpricing from 2002 to 2011. Following the methodology of Liu and Xiong (2005), I find that during the pre-SSR period the government intervention and corporate governance in listed firms have no relationship and a positive relationship respectively with the degree of IPO underpricing, which is consistent with the extant literature. By contrast, during the post- SSR period, a positive relationship arises between government intervention and the degree of IPO underpricing, while there is a negative relationship between corporate governance and the degree of IPO underpricing. In terms of the external market circumstance, I speculate the market liquidity and scale of IPOs should be responsible for the unexpected results in both pre-SSR and post-SSR period. Additionally, I find strong evidence that the problem of a high degree of IPO underpricing has been reduced by the reform.

Download or read book Investment Without Risk written by Ti Liu and published by . This book was released on 2004 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: China enjoys the highest level of initial returns of initial public offerings (IPOs) in the world, with an average market-adjusted initial return of 132.49%, using data on 354 new issues in China from 1 January 1999 to 31 December 2002. This paper advances an explanation of this phenomenon. It proposes some possible reasons for the high returns and finds that most of the hypotheses based on information asymmetry, such as the winner's curse, signaling, market feedback and the bandwagon hypothesis, fail to fully explain the phenomenon of underpricing. The paper finds only weak evidence for the winner's curse hypothesis. Only the IPO size has a statistically significant positive relationship with the level of the market-adjusted initial returns. The paper argues that the underpricing of IPOs is the result of the interactive process between the offer price and the trading price on the secondary market, while the information asymmetry hypotheses only focus on the determination of the offer price. A new explanation focusing on the interplay of supply and demand in both primary and secondary markets is advanced and tested using the sample data. The results show that IPO underpricing in China is the result of overpriced secondary market shares under the condition of de facto segmented markets. IPO underpricing is positively related to the trading price in the secondary market, i.e., the higher the P/E ratio of the market (used as a proxy for trading price level in the secondary market), the more underpricing that occurred in the IPO. China's primary and secondary markets are in practice segmented, i.e., in general money from one does not flow to the other. Under these conditions, the returns in the two markets show little tendency to converge. This theory suggests that secondary market reform is essential to mature the primary market. Among all the reform measures, making non-tradable shares tradable and introducing shortselling or a day-trading mechanism are most important to lowering secondary market prices to more reasonable levels.

Download or read book IPO Underpricing and Long Run Performance in Singapore written by Chee Wai Kwan and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: [Truncated] This study employs a composite corporate governance index, specific corporate governance variables, and a full range of firm-specific variables to examine initial returns and long-run performance of IPOs in Singapore. It appears to be the first study to examine this combination of variables and to adopt both qualitative and quantitative approaches. An initial qualitative phase involves interviews with representatives from three major parties to an IPO transaction: issuers, underwriters, and investors. Their views are sought on the relative importance of corporate governance, appropriateness of particular items for the construction of a corporate governance index (CGI) and how IPO performance should be measured. The quantitative phase examines the extent to which the level of underpricing and long-run performance of the IPOs are associated with: (i) corporate governance attributes, (ii) whether the IPO is VC-backed and (iii) the lock-up period for the IPOs. The qualitative phase reveals that interviewees see a positive relationship between corporate governance and IPO performance in the long-run, but not in the short-term. In addition, they feel that IPOs producing better results have the following governance attributes: larger board size with a good mix of skills and experience among the independent directors, a dual leadership structure, a higher level of equity ownership by the directors after listing, backed by venture capitalists, and a longer lock-up period. Some of the interviewees do not believe IPO performance is necessarily related to which board the IPO is listed on - the Main or SESDAQ, though some do.

Download or read book Alternative Explanations of Under pricing of Chinese Initial Public Offerings written by Jie Yuan and published by . This book was released on 2009 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The thesis contains an empirical study designed to reveal why initial public offerings (IPO) of common stocks (A-share) in China are on average under-priced from alternative angles as opposed to more established theories, using a dataset of 880 IPOs from January 1996 to December 2003. A much higher degree of under-pricing compared to developed markets and even other emerging markets is a distinct feature of China’s A-share IPOs. Previous literatures based on classical hypotheses have not been able to fully explain such high level of under-pricing. Hence, alternative explanations have been put forward by academics as well as practitioner. It is said that the Chinese government has big influences in China’s primary market through tightly controlled issuing system and opaque regulatory constraints. People speculate that such influences have been both intentionally and unintentionally exerted, causing IPO under-pricing. A major contribution of the thesis is to test some new hypotheses based on three untested statements in China’s IPO literatures i.e. speculation effect, “Western Region Development” policy effect and government protection effect, which are all associated with government direct or indirect influences. More specifically, speculation effect hypotheses assume that the government constraints and regulator drawbacks have caused high level of speculation, which in turn drives the IPO under-pricing. “Western Region Development” policy effect hypotheses claim that government intentionally uses IPO under-pricing to lure investments into less developed and thus less favourable western region companies. Government protection effect hypotheses conjecture that IPO under-pricing is a compensation for investors’ concern of potential government interference in the government-protected firms. The thesis finds that speculation effect hypothesis is largely supported by empirical data while the other two are not. The thesis has also re-tested hypotheses advanced in previous literatures including classical information asymmetry hypotheses, ex ante uncertainty hypotheses, investors’ behaviour hypotheses as well as existing China-specific hypothesis such as listing time lag hypothesis. Proxies such as government retention rate that have emerged in privatisation IPO literatures are also borrowed by Chinese researchers looking into China-specific institutional settings such as dominant government control. The thesis finds that information asymmetry hypotheses in general show more strength in explaining China’s IPO under-pricing while empirical evidence for other hypotheses are either mixed or weak. In the end, the thesis finds that alternative angles emerging from the tests of the three statements combined with some classical hypotheses supported by empirical data have a greater power to explain China’s high IPO under-pricing. The so-called “floatation game” hypothesis has been put forward by researchers such as Tian (2003) who claims that the Chinese government makes use of IPOs with different lengths of IPO listing time lag i.e. the time lag between IPO announcement date and actual listing date to adjust the equity market cycle. In other words, the government let go public the IPOs with longer listing time lag thus more likely higher initial returns in the bear market and vice versa. The thesis does not find support to the “floatation game” hypothesis, although the thesis does find that the market cycle is closely related to the IPO under-pricing and the number of IPOs issued.

Download or read book The Chinese Initial Public Offering Market written by Haifeng Guo and published by . This book was released on 2009 with total page 372 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis conducts three empirical studies on the Chinese A-share initial public offering (IPO) market, specifically, underpricing and short-run underperformance, duration from offering to listing and hot and cold issuing cycles. Before the empirical analysis, the literature is reviewed associated with these three topics. In addition, this thesis presents an overview of the Chinese IPO market which is found to undergo an experiment period from 1984 to 1990, a transition period from 1991 to 1993 and finally steps into a relatively mature stage from 1994. The issuing systems, allocation mechanisms, pricing methods, structure of shareholders are also discussed.The first empirical study analyses underpricing and short-run underperformance of the Chinese A-share IPOs from Mar, 2001 to 2005 when the Approval System is adopted. We find the market adjusted first-day returns average at 93.49% during this period. Then we explore why Chinese IPOs are underpriced so much. The influences of inequality of IPO demand and supply, allocation mechanisms, structure of shareholders, duration to listing and underwriters are discussed respectively. Based on the discussion, we construct an ordinary least squares regression model and find that the underpricing is positively related to this IPO's turnover ratio and state-owned shares and negatively related to its offering price, issuing size, etc. Meanwhile, this study extends the estimation and compares these IPOs' short-run underperformance on their 10th, 20th, 30th trading day. We find that the levels of short-run underpricing shrink. Both allocation mechanisms and underwriters can impact the degree of shrinking. The second empirical study estimates the duration from offering to listing of Chinese A-share IPOs issued from 1994 to 2005. We firstly explain the different IPO issuing procedures under the Administrative Authorizing System and the Approval System respectively and then compare the effects of these two issuing systems on the length of this duration. The findings indicate that the waiting time to listing has been shortened greatly after the Approval System is adopted. Secondly, this study emphasizes on exploring endogenous factors related to an issuer itself, such as this issuer's quality, market sentiment, allocation mechanism, and underwriter, etc. Then a Cox proportional hazard model is employed to examine these factors' influences on this issuer's final listing. Further, this study extends the analysis to explore the role of the issuing system and issuing year respectively. Most endogenous factors are found to still be functioning when we take into account the effect of the issuing system, but the effects of underwriter, allocation mechanism, offering price and floatation size diminish in favour of the effect of issuing year. The third empirical study focuses on detecting hot and cold IPO cycles in the Chinese A-share market during 1994-2005 using a Markov regime switching model. We introduce a set of observations to measure IPO monthly activities, which include the number of IPOs, underpricing, market conditions and duration to listing, and thus establish a model to estimate these activities' average performance in hot and cold periods respectively. It is found that a hot period is related with an abundant supply of IPOs, high levels of underpricing, positive market conditions and short waiting time to listing. This study presents the turning points of hot and cold periods for each observation. The cycles detected by the number of IPOs are the benchmark and then these cycles' robustness is tested by the other observations.

Download or read book Empirical Study on Post Ipo Long Run Performance in the Chinese Stock Market written by Zhongguang Bai and published by . This book was released on 2004 with total page 18 pages. Available in PDF, EPUB and Kindle. Book excerpt: It is testified that there exists poor post-IPO long-run performance in many stock markets. This paper examines Chinese IPOs' long-run performance based on the data of IPOs in the Chinese stock market. In this study, the empirical methods of style matched portfolios and Fama-French three-factor model are employed. It is found that IPOs' long-run performance is better than that of matched non-IPOs in Chinese stock market, and the abnormal returns of IPOs cannot be reasonably explained by F-F three-factor model. In addition, the long-run performance of IPOs is related with their first day returns.

Download or read book Suspensions of IPO Markets in China by CRSC and Their Effect on IPO Underpricing and Long term Stock Market Performance written by Xufan Deng and published by . This book was released on 2015 with total page 182 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis examines the effects of the IPO market suspensions and reopenings in China that were ordered by the China Securities Regulatory Commission (CSRC) on IPO underpricing and long-term stock performance in China. The analyses are based on a sample of Chinese A-share IPOs from 2001 to 2013.

Download or read book Initial Public Offering and Corporate Governance in China s Transitional Economy written by Chen-Chien Hsun and published by . This book was released on 2003 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract: This paper empirically investigates the performance of Chinese initial public offerings (IPOs). The data used covers the period from mid-1995 to mid-1999 with the sample including 884 companies (both in the A- and B-share markets). In an examination of growth, profitability and stability of listed companies either individually or as a combination, it can be seen that the only industries in which listed companies in China display strong performance are public utilities, transportation and finance. If one examines the changes in listed companies' financial indicators following the IPO, it becomes apparent that with the exception of earnings related indicators (EPS and ROE) there are no significant changes. What's more, the financial indicators tend to fall rapidly year on year. This means that the IPO is of little obvious help to companies' operational performance, and may actually make things worse. One of the reasons for this is that in order to implement the IPO and secure stock market listing, companies tend to submit inflated figures in the financial statements that they are required to provide. Another possible factor is the poor corporate governance characteristics of Chinese enterprises.