The Impact on IPO Performance of More Stringent Listing Rules with a Pre-Listing Earnings Requirement: Evidence from Hong Kong

HKIMR Working Paper No. 17/2005

24 Pages Posted: 22 Aug 2007

See all articles by Wai-yan Cheng

Wai-yan Cheng

City University of Hong Kong (CityUHK) - Department of Economics & Finance

Yuen-ching Tse

City University of Hong Kong (CityUHK) - Department of Economics & Finance

Stephen Yan-Leung Cheung

City University of Hong Kong (CityUHK) - Department of Economics & Finance

Multiple version iconThere are 2 versions of this paper

Date Written: October 2005

Abstract

This study considers the impact of a change to listing rules covering IPO performance in the Hong Kong stock market. The change, introduced in 1994, imposed a three-year pre-listing earning requirement on new issues. The objective of this research is to screen out a subset of poor IPO performers. We find there is no significant difference in performance between IPOs before and after the regulatory change. We further divide our sample of IPOs registered before the regulatory change into two sub-samples: those that did and those that did not fulfill the earnings requirement. The result shows that there is no significant difference in performance between the two IPO sub-samples. This implies that the existence of pre-listing earnings does not guarantee good long-term IPO performance and the pre-listing earnings of new issues is not an effective screen for 'bad' IPO performers. This study further analyzes the rationale for rule change in the context of recent developments in the Hong Kong stock market and concludes that the rule change is part of the reform programme aimed at introducing a second board market for small companies and at attracting more China-related listings to the main board.

Keywords: IPO, regulatory change, Hong Kong

Suggested Citation

Cheng, Wai Yan and Tse, Yuen Ching and Cheung, Stephen Yan-Leung, The Impact on IPO Performance of More Stringent Listing Rules with a Pre-Listing Earnings Requirement: Evidence from Hong Kong (October 2005). HKIMR Working Paper No. 17/2005, Available at SSRN: https://ssrn.com/abstract=1008763 or http://dx.doi.org/10.2139/ssrn.1008763

Wai Yan Cheng (Contact Author)

City University of Hong Kong (CityUHK) - Department of Economics & Finance ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong
(852)2194 2439 (Phone)
(852)2788 8842 (Fax)

HOME PAGE: http://roweb.cityu.edu.hk/researchreport/2002-2003/profile/1080F.htm

Yuen Ching Tse

City University of Hong Kong (CityUHK) - Department of Economics & Finance ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong

Stephen Yan-Leung Cheung

City University of Hong Kong (CityUHK) - Department of Economics & Finance ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong
+852 2788 7960 (Phone)
+852 2788 8806 (Fax)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
152
Abstract Views
2,035
rank
203,156
PlumX Metrics