Institutional Environment, Firm Ownership and IPO First-Day Returns: Evidence from China

49 Pages Posted: 29 Jan 2013

See all articles by Yibiao Chen

Yibiao Chen

Hong Kong Polytechnic University

Steven Shuye Wang

School of Business, Renmin University of China

Wei Li

Hong Kong Polytechnic University - School of Accounting and Finance

Wilson H.S. Tong

Hong Kong Polytechnic University

Multiple version iconThere are 2 versions of this paper

Date Written: January 8, 2013

Abstract

This paper examines how the difference in institutional environment across various provinces in China can explain IPO underpricing in the Chinese equity market. Using Chinese IPO data from 1999 to 2007, we find strong evidence that firms located in regions with better institutional environment (i.e., better credit market development, less governmental intervention and better legal environment) have significantly smaller IPO discounts than their counterparties. In addition private firms have less severe underpricing problems relative to state owned enterprises (SOEs). Finally, we find that local government controlled IPO firms have less severe underpricing problems than firms controlled by the central government.

Keywords: IPO underpricing, share issue privatization, institution, SOEs

JEL Classification: G1, G30, G32

Suggested Citation

Chen, Yibiao and Wang, Steven Shuye and Li, Tina Wei and Tong, Wilson H.S., Institutional Environment, Firm Ownership and IPO First-Day Returns: Evidence from China (January 8, 2013). Asian Finance Association (AsFA) 2013 Conference. Available at SSRN: https://ssrn.com/abstract=2207893 or http://dx.doi.org/10.2139/ssrn.2207893

Yibiao Chen

Hong Kong Polytechnic University ( email )

Hung Hom, Kowloon
Hong Kong

Steven Shuye Wang (Contact Author)

School of Business, Renmin University of China ( email )

Beijing
China
8610-6251-8856 (Phone)

HOME PAGE: http://rbs.org.cn

Tina Wei Li

Hong Kong Polytechnic University - School of Accounting and Finance ( email )

M715, Li Ka Shing Tower
Hung Hom, Kowloon, Kowloon
Hong Kong

Wilson H.S. Tong

Hong Kong Polytechnic University ( email )

Hong Kong

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