Initial Public Offerings Chinese Style

Forthcoming in Journal of Financial and Quantitative Analysis

69 Pages Posted: 15 Sep 2020 Last revised: 17 Feb 2023

See all articles by Yiming Qian

Yiming Qian

University of Connecticut - Department of Finance

Jay R. Ritter

University of Florida - Department of Finance, Insurance and Real Estate

Xinjian Shao

University of International Business and Economics (UIBE)

Date Written: January 12, 2023

Abstract

This paper provides a survey of China’s IPO market, focusing on IPO pricing, bids and allocation, and aftermarket trading. We show that strict regulations result in suppressed IPO offer prices and high initial returns, causing a high cost of going public. Investors treat IPOs as lotteries with extremely high short-term returns, with little attention to the long-term. The auction selling method, however, works in the way it is supposed to. Mutual funds bid in a more informative way than other investors, and their advantages are unlikely to be due to underwriters’ preferential treatment. We also discuss the latest registration-system reform.

Keywords: IPO, China, STAR Market, IPO Method, Under-pricing, Bidding, Allocation, Trading, registration system, reform

JEL Classification: G15, G24, G32,

Suggested Citation

Qian, Yiming and Ritter, Jay R. and Shao, Xinjian, Initial Public Offerings Chinese Style (January 12, 2023). Forthcoming in Journal of Financial and Quantitative Analysis, Available at SSRN: https://ssrn.com/abstract=3682089 or http://dx.doi.org/10.2139/ssrn.3682089

Yiming Qian (Contact Author)

University of Connecticut - Department of Finance ( email )

2100 Hillside Road U-1041F, Room 452
Storrs, CT 06269
United States
860-486-2774 (Phone)

Jay R. Ritter

University of Florida - Department of Finance, Insurance and Real Estate ( email )

P.O. Box 117168
Gainesville, FL 32611
United States
(352) 846-2837 (Phone)
(352) 392-0301 (Fax)

HOME PAGE: http://https://site.warrington.ufl.edu/ritter

Xinjian Shao

University of International Business and Economics (UIBE) ( email )

10, Huixin Dongjie
Changyang District
Beijing, Beijing 100029
China

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