IPO underpricing in China's new stock markets

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

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Author(s)

Detail(s)

Original languageEnglish
Pages (from-to)283-302
Journal / PublicationJournal of Multinational Financial Management
Volume14
Issue number3
Publication statusPublished - Jul 2004
Externally publishedYes

Abstract

China's recent economic reforms have included the privatization and listing of many state-owned enterprizes (SOEs). This study investigates the pricing of initial public offerings of A-shares sold to domestic investors and B-shares sold to foreign investors. Our data consist of 701 A-share IPOs and 117 B-share IPOs that listed in the period 1992-1997. The median initial return on A-share IPOs is 145% while the median underpricing of B-shares is just 10%. We find that risk is strongly and positively associated with the underpricing of A-shares. High government and legal entity shareholdings are also associated with underpricing. B-share underpricing is positively related to seasoned equity offerings (SEOs) and government ownership. We find that underpricing is a positive function of the relative price-to-book ratio and the relative price-earnings multiple. Our study gives some insights into the pricing of new issues on China's stock exchanges. © 2003 Elsevier B.V. All rights reserved.

Research Area(s)

  • China's stock markets, IPOs, Underpricing

Citation Format(s)

IPO underpricing in China's new stock markets. / Chen, Gongmeng; Firth, Michael; Kim, Jeong-Bon.

In: Journal of Multinational Financial Management, Vol. 14, No. 3, 07.2004, p. 283-302.

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review