The Cross-Sectional Determinants of Post-IPO Stock Performance: Evidence from China

37 Pages Posted: 6 Oct 2009

See all articles by Xin (Simba) Chang

Xin (Simba) Chang

Nanyang Business School, Nanyang Technological University

Lewis Tam

Faculty of Business Administration, University of Macau

George Wong

The Hong Kong Polytechnic University

Date Written: September 30, 2009

Abstract

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

Suggested Citation

Chang, Xin and Tam, Lewis and Wong, George, The Cross-Sectional Determinants of Post-IPO Stock Performance: Evidence from China (September 30, 2009). Available at SSRN: https://ssrn.com/abstract=1482882 or http://dx.doi.org/10.2139/ssrn.1482882

Xin Chang

Nanyang Business School, Nanyang Technological University ( email )

S3-B1B-76 Nanyang Avenue
Singapore, 639798
Singapore

HOME PAGE: http://www.ntu.edu.sg/home/changxin

Lewis Tam (Contact Author)

Faculty of Business Administration, University of Macau ( email )

Room E22-4055, University of Macau
Avenida da Universidade
Taipa
Macau

George Wong

The Hong Kong Polytechnic University ( email )

School of Accounting and Finance
Hung Hom, Kowloon, 0
Hong Kong
852 3400 3459 (Phone)
852 2330 9845 (Fax)

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