IPO Location as a Quality Signal: The Case of Chinese Developers

Posted: 14 Nov 2014 Last revised: 19 Jun 2015

See all articles by Siu Kei Wong

Siu Kei Wong

University of Hong Kong

Q. L. Wei

Independent

K.W. Chau

The University of Hong Kong - Ronald Coase Centre for Property Rights Research - Economics

Multiple version iconThere are 2 versions of this paper

Date Written: November 4, 2014

Abstract

A growing number of mainland Chinese real estate firms went public over the past decade. Some floated their shares in Hong Kong, while others were listed on mainland stock exchanges. This paper empirically examines the determinants of their initial public offering (IPO) location choice. Based on profit analysis, we found that developers with better unobserved quality are more likely to list in Hong Kong than in the mainland. State ownership, gearing ratio, and property market performance are other significant determinants of IPO locations. A further test shows that the degree of IPO underpricing is larger for firms listed in mainland China than those listed in Hong Kong. All these findings are consistent with the signaling hypothesis - good firms signal their quality to investors by listing with more stringent regulatory environment where other firms cannot afford to imitate.

Keywords: IPO; Location; Signaling; Underpricing

Suggested Citation

Wong, Siu Kei and Wei, Q. L. and Chau, Kwong Wing, IPO Location as a Quality Signal: The Case of Chinese Developers (November 4, 2014). Journal of Real Estate Finance and Economics, Vol. 49, No. 4, 2014, Available at SSRN: https://ssrn.com/abstract=2519188

Siu Kei Wong (Contact Author)

University of Hong Kong ( email )

Pokfulam Road
Hong Kong, HK
China

Q. L. Wei

Independent

Kwong Wing Chau

The University of Hong Kong - Ronald Coase Centre for Property Rights Research - Economics ( email )

Ronald Coase Centre for Property Rights Research
Pokfulam Road
Hong Kong
Hong Kong
(852)28592128 (Phone)
(852)25599457 (Fax)

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