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Title: Under-pricing and long-run performance of IPOs in China
Keywords: Initial Public Offerings (IPOs); Under-pricing; Long-run Performance; China Stock Market; IPO Valuation.
Issue Date: 14-Oct-2004
Citation: ZHANG FENG (2004-10-14). Under-pricing and long-run performance of IPOs in China. ScholarBank@NUS Repository.
Abstract: We examine the under-pricing and long-run performance of 230 A-share IPOs issued from 1997 to 1998 in China using comparable firm multiples. We find that the A-share IPOs are severely under-priced and under-valued by about 50% by issuers and underwriters at the offer. We also find positive relationship between magnitudes of under-valuation and initial return of IPO, thereby implying that under-valuation may cause under-pricing. In contrast with under-valuation by issuers and underwriters, investors tend to over-valuate IPOs on the listing day. This may indicate that under-valuation by issuers and underwriters and over-valuation by investors jointly causes the severe under-pricing of IPOs. Furthermore, we detect a 30% out-performance of IPOs with respect to the market after 36 months of listing. But IPOs under-perform their matching firms by 25% after 36 months of listing, and those IPOs over-valued by investors on the listing day under-perform those under-valued IPOs in the long-run.
Appears in Collections:Master's Theses (Open)

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