Regulated Price and Demand in China’s IPO Market

35 Pages Posted: 16 Jul 2018 Last revised: 31 May 2019

See all articles by Paul Geertsema

Paul Geertsema

University of Auckland - Department of Accounting and Finance

Helen Lu

University of Auckland - Department of Accounting and Finance

Date Written: October 25, 2018

Abstract

We use simultaneous equations to model the bi-directional causality between IPO initial returns and oversubscription ratios in China. We find that the causality is one-directional from oversubscription ratios to IPO initial returns in the post-reform period (2005–2015), which is consistent with a demand effect. By contrast, a demand effect did not exist in the pre-reform period (1996–2004). Our findings suggest that the 2005 reform of the IPO pricing mechanism has allowed IPO prices to be determined by market forces in China.

Keywords: Initial Public Offering; IPO Underpricing, IPO Oversubscription, Endogeneity, Simultaneous Equations, A-share Markets

JEL Classification: G15, G24, C01

Suggested Citation

Geertsema, Paul G. and Lu, Helen, Regulated Price and Demand in China’s IPO Market (October 25, 2018). Available at SSRN: https://ssrn.com/abstract=3203032 or http://dx.doi.org/10.2139/ssrn.3203032

Paul G. Geertsema (Contact Author)

University of Auckland - Department of Accounting and Finance ( email )

12 Grafton Rd
Private Bag 92019
Auckland, 1010
New Zealand

Helen Lu

University of Auckland - Department of Accounting and Finance ( email )

Private Bag 92019
Auckland 1001
New Zealand

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
73
Abstract Views
486
rank
347,406
PlumX Metrics