The Cross-Sectional Determinants of Post-IPO Stock Performance: Evidence from China
37 Pages Posted: 6 Oct 2009
Date Written: September 30, 2009
This paper examines the cross-sectional determinants of post-IPO long-term stock returns in China. We document that the aftermarket P/E ratio has the most robust negative association with post-IPO stock returns. The negative relation indicates that the market corrects the aftermarket overvaluation of IPO firms in the long run. Underwriter reputation has a positive effect on post-IPO stock returns while board size has a negative impact, consistent with the views that reputable underwriters mitigate the information asymmetry in IPO pricing and over-sized boards reduce the effectiveness of corporate governance. However, we find little evidence indicating that the equity ownership structure is significantly associated with post-IPO stock returns.
Keywords: Post-IPO performance, China Stock Markets, Overvaluation, Ownership Structure, Underwriter Reputation
JEL Classification: G32, G24
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