Initial Public Offerings Chinese Style
Forthcoming in Journal of Financial and Quantitative Analysis
69 Pages Posted: 15 Sep 2020 Last revised: 17 Feb 2023
Date Written: January 12, 2023
This paper provides a survey of China’s IPO market, focusing on IPO pricing, bids and allocation, and aftermarket trading. We show that strict regulations result in suppressed IPO offer prices and high initial returns, causing a high cost of going public. Investors treat IPOs as lotteries with extremely high short-term returns, with little attention to the long-term. The auction selling method, however, works in the way it is supposed to. Mutual funds bid in a more informative way than other investors, and their advantages are unlikely to be due to underwriters’ preferential treatment. We also discuss the latest registration-system reform.
Keywords: IPO, China, STAR Market, IPO Method, Under-pricing, Bidding, Allocation, Trading, registration system, reform
JEL Classification: G15, G24, G32,
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