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

(2014) The Journal of Real Estate Finance and Economics, 49(4), 551-567.

29 Pages Posted: 30 Oct 2015

See all articles by Siu Kei Wong

Siu Kei Wong

University of Hong Kong

Qian Wei

The University of Hong Kong

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: June 11, 2011

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 probit 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 in market with more stringent regulatory environment where other firms cannot afford to imitate.

Keywords: IPO, location, signaling, underpricing

Suggested Citation

Wong, Siu Kei and Wei, Qian and Chau, Kwong Wing, IPO Location as a Quality Signal: The Case of Chinese Developers (June 11, 2011). (2014) The Journal of Real Estate Finance and Economics, 49(4), 551-567., Available at SSRN: https://ssrn.com/abstract=2683710

Siu Kei Wong

University of Hong Kong ( email )

Pokfulam Road
Hong Kong, HK
China

Qian Wei

The University of Hong Kong ( email )

Pokfulam Road
Hong Kong, Pokfulam HK
China

Kwong Wing Chau (Contact Author)

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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