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

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