IPO Underpricing in China: New Evidence from the Primary and Secondary Markets

37 Pages Posted: 12 Feb 2007

See all articles by Eddy Chang

Eddy Chang

BNP Paribas - Fixed Income

Chao Chen

Fudan University

Jing Chi

Massey University - School of Economics and Finance

Martin R. Young

Massey University - School of Economics and Finance

Date Written: January 2007

Abstract

This paper divides Chinese A-Share IPO initial returns into the initial return of the primary market and of the secondary market. Our empirical evidence shows that the initial abnormal return on the secondary market is significantly positive. This study also finds that 1) the initial return of the primary market is negatively related to the subscription or lottery ratio; 2) the initial return of the secondary market is positively related to the market return, and negatively related to IPO offering prices; 3) the initial turnover is negatively related to the offering size; 4) the initial turnover has no impact on the initial return of the secondary market but the latter has a significantly positive influence on the initial turnover.

Keywords: Initial return, Chinese primary market, Chinese secondary market

JEL Classification: G12, G14, G24, G32

Suggested Citation

Chang, Eddy and Chen, Chao and Chi, Jing and Young, Martin R., IPO Underpricing in China: New Evidence from the Primary and Secondary Markets (January 2007). Available at SSRN: https://ssrn.com/abstract=962256 or http://dx.doi.org/10.2139/ssrn.962256

Eddy Chang

BNP Paribas - Fixed Income ( email )

Hong Kong

Chao Chen

Fudan University ( email )

School of Management
670 Guoshun Road
Shanghai, 200433
China

Jing Chi (Contact Author)

Massey University - School of Economics and Finance ( email )

Private Bag 11-222
Palmerston North,, 4442
New Zealand
+64 6 3569099 Ext. 84048 (Phone)
+64 6 350 5651 (Fax)

Martin R. Young

Massey University - School of Economics and Finance ( email )

Private Bag 11222
Palmerston North, 4442
New Zealand

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