Empirical Study on the Performance of Initial Public Offerings in China

Read  full  paper  at:http://www.scirp.org/journal/PaperInformation.aspx?PaperID=101#.VNsVKyzQrzE

We study the long-run performance of 166 IPOs listed on China’s Shanghai Stock Exchanges from 2000 to 2002. We find that the average market-adjusted cumulative return and buy-and-hold return over the three years after listing are -32.02% and -20.88%, which are both significantly negative. What’s more, as an additional robustness check, we cal-culate wealth relatives. One year after listing, WR less than 1 and we obtain a three-year wealth relative of 0.6826, consistent with the CAR and BHAR estimates. We then use a cross-sectional analysis to explain the long-run underper-formance of Chinese IPOs. The results show that the aftermarket performance is positive after listing (6 months) but thereafter returns decline. Buying A-share IPOs immediately after listing and holding the investment for three years results in negative returns and wealth relatives less than one.

Cite this paper

P. Liang, “Empirical Study on the Performance of Initial Public Offerings in China,” Journal of Service Science and Management, Vol. 1 No. 2, 2008, pp. 135-142. doi: 10.4236/jssm.2008.12014.

References

[1] Aggarwal, R., R. Leal and L. Hernandez, 1993, The After-market Performance of Initial Public Offerings in Latin America, Financial Management, Vol,22, pp.42-53.
[2] Barber B.,Lyon,J.1997) Detecting long-run abnor-mal stock returns: the empirical power and Specification of test statistics, Journal of Financial Economics,Vol.43, pp.341-372.
[3] Cai, J., and K.Wei.1997. The investment and operating performance of Japanese IPO, Pacific Basin Finance Journal, Vol.5, pp.389-417.
[4] Chan, K., J.B. Wang and K.C. Wei, 2004, Underpricing and Long-term Performance of IPOs in China, Journal of Corporate Finance, Vol.10, pp.409-430.
[5] Fama, E.F., 1998, Market Efficiency, Long-term Re-turns, and Behavioral Finance, Journal of Financial Economics, Vol .49, pp.283-306.
[6] Hanley, K. 1993, The Underpricing of initial public offerings and the partial adjustment phenomenon. Jour-nal of Financial Econ, Vol. 34, pp.213–250.
[7] Keloharju, M.1993. The winner’s curse, legal liability,and the long-run price performance of initial public of-ferings in the Finland. Journal of Financial Economics, Vol.34, pp.251-277.
[8] Kim, J., I, Krinsky, and J.Lee.1995 The aftermarket performance of initial public offerings in Korea, Pacific Basin Finance Journal,Vol.3, pp.429-448.
[9] Kooli,M., and J.M.Suret 2003. The aftermarket per-formance of Canadian IPOs. Journal of Multinational Financial Management: Forthcoing.
[10] Kothari, S.P. and J.B. Warner, 1997, Measuring Long-horizon Security Price Performance, Journal of Financial Economics Vol.43, pp.301-340.
[11] Loughran,Tim, Jay R.Ritter, Kristian Rydqvist(1994), “Initial Public offerings: International Insights”, Pacific Basin Finance Journal,Vol.2, pp.165-199.
[12] Levis, M., 1993, The Long-run Performance of Initial Public Offerings: The UK Experience 1980-1988, Fi-nancial Management, Vol, 22, pp.28-41.
[13] Ljungqvist, A.1997. Pricing initial public offerings: Futher evidence from Germany. European Economic Review, Vol.41, pp.1309-1320.
[14] Loughran, Tim, Ritter J. (1995) “the new issues puzzle”, Journal of Finance, Vol.50, pp.23-51.
[15] Loughran, T., J.R. Ritter and K. Rydqvist, 1994, Inter-national Public Offerings: International Insights, Pa-cific-Basin Financial Journal, Vol. 2, pp.165-199.
[16] Michael Firth(1997) an Analysis of the stock market performance of new issues in New Zealand,Pacific Basin Finance Journal,Vol.5, pp.63-85.
[17] Lyon, J., B. Barber and C.L. Tsai, 1999, Improved Methods for Tests of Long-run Abnormal Stock Returns, Journal of Finance, Vol. 54, pp.165-201.
[18] Mok, H.M.K. and Y.V. Hui, 1998, Underpricing and After Market Performance of IPOs in Shanghai, China, Pacific-Basin Finance Journal, Vol. 6, pp.453-474.
[19] Ritter,Jay R.(1991) “The long-run performance of initial public offerings”, Journal of Finance, Vol.46, pp.3-27.
[20] Sun, Q. and H.S. Tong, 2003, China Share Issue Priva-tization: The Extent of its Success, Journal of Financial Economics, Vol .70, pp.183-222.
[21] Tian, G. 2000, State shareholding and the value of Chi-nese Firms, Working Paper, London Business School Wong K, Tan R, Liu W.2006, The cross-section of stock returns on the Shanghai stock exchange. Rev Quant Fi-nancial Account, Vol, 26, pp.23–39.                                           eww150211lx
Advertisements

发表评论

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / 更改 )

Twitter picture

You are commenting using your Twitter account. Log Out / 更改 )

Facebook photo

You are commenting using your Facebook account. Log Out / 更改 )

Google+ photo

You are commenting using your Google+ account. Log Out / 更改 )

Connecting to %s