The Performance and Long-Run Characteristics of the Chinese IPO Market
U of Reading, ISMA Centre Discussion Paper No. 2002-09
35 Pages Posted: 14 May 2002
Date Written: April 23, 2002
We study the short-run and long-run performance of Chinese privatization initial public offerings (PIPOs), using data for 340 and 409 new issues on the Shanghai and Shenzhen Stock Exchanges respectively, from 1 January 1996 through 31 December 1997. The average market-adjusted initial return is found to be 127.31%, and the initial returns on both stock exchanges are not significantly different from each other. The average market-adjusted buy and hold return over the three years after listing is 10.26%, which is significantly different from zero at the 1% level. We then use cross-sectional analysis to explain the long-run supernormal performance of Chinese PIPOs, and find that government ownership, the offering size and the feature of belonging to a high-tech industry are the main determinants of the long-run performance. In addition, firms that perform better in the long-run tend to make more Seasoned Equity Offerings (SEOs), and the underpricing of IPOs is negatively related to their long-run performance.
Keywords: IPO, underpricing, long-run performance, government ownership, offering size, high-tech industry, China
JEL Classification: G32, G15, P21
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