An empirical investigation of underpricing in Chinese IPOs

Su, Dongweí; Fleisher, Belton M.

doi:10.1016/s0927-538x(99)00005-0

Cited by 205 publications

(119 citation statements)

References 14 publications

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“…The State Planning Commission, in conjunction with China's central bank (the People's Bank of China) and the China Securities Regulatory Commission (CSRC), determines a quota for new firms to be listed each year. The quota is then allocated among the provinces and regions (Su and Fleisher (1999)). Moreover, the process is severely restrictive in that far more companies could successfully issue shares each year than the quota allows.…”

Section: China's Share Issue Privatization and Ownership Structurmentioning

confidence: 99%

Ownership Structure and Firm Value in China's Privatized Firms: 1991–2001

Wei¹,

Xie²,

Zhang³

2005

J. Financ. Quant. Anal.

461

316

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This paper investigates the relation between ownership structure and firm value across a sample of 5,284 firm years of China's partially privatized former state-owned enterprises (SOE) from 1991-2001. We find that state and institutional shares are significantly negatively related to Tobin's Q, and that significant convex relations exist between Q and state shares, as well as between Q and institutional shares. We also find that foreign ownership is significantly positively related to Tobin's Q. We test for potential endogeneity of ownership, and find that Q and state/foreign ownership are not jointly determined. We also test for time-series, industry, and geo-economic location effects, and find our results to be robust.

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Section: China's Share Issue Privatization and Ownership Structurmentioning

confidence: 99%

Ownership Structure and Firm Value in China's Privatized Firms: 1991–2001

Wei¹,

Xie²,

Zhang³

2005

J. Financ. Quant. Anal.

461

316

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“…For these firms, which were highly levered and consumed substantial subsidies, the government welcomed the stock market as an alternative financing source. Consistent with these arguments is the finding of Su and Fleisher (1999) that over 90% of Chinese newly privatized firms listed before June 1994 execute seasoned equity offerings within a short period after their SIP. In later years, the Chinese government opens ownership to a larger extent in firms with inferior profitability and limited growth prospects.…”

Section: Introductionmentioning

confidence: 76%

Share Issuing Privatizations in China: Determinants of Public Share Allocation and Underpricing

Quan

Huyghebaert

2006

SSRN Journal

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Abstract:Using data on 451 Chinese privatizations over the period [1994][1995][1996][1997][1998][1999][2000][2001][2002], this paper empirically investigates the firm and stock market characteristics that determine the size of the portion of new shares sold to the general public and underpricing at SIP-time. We find that poor performance and financing constraints, reflected by a low profitability and high leverage, mainly drive public share allocation. Also, the government widens ownership to a larger extent in firms that receive substantial subsidies. By contrast, stock market returns pre-SIP and variables capturing the firm's growth opportunities do not positively affect public share allocation. Yet, in firms with a low market-to-book ratio, the government is more likely to relinquish its majority stake at SIP-time. The determinants of underpricing further illustrate the uniqueness of SIPs compared to private-firm IPOs. Overall, there is little evidence that information asymmetries regarding firm value influence first-day returns whereas stock market conditions have an impact. After accounting for the endogeneity of the public share allocation decision, we find that the fraction of ownership divested is significantly positively related to underpricing.

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“…According to Su and Fleisher (1997), the IPO markets in China have several intriguing traits. First, the government, not the market, determines through the State Planning Committee of the People's Bank of China, the Chinese central bank, and the China Securities Regulatory Committee (CSRC), the quota or aggregate amount of new shares to be issued each year, which is then distributed to individual provinces.…”

Section: A Ipos In Chinese Marketsmentioning

confidence: 99%

“…The surprising underpricing phenomenon in IPO markets still exists as a puzzle. Su and Fleisher (1997) report that the primary purpose for Chinese firms going public is to raise owners' capital, not mainly to transfer state ownership to private sectors, that IPO underpricing is the largest at the earliest stage of development of stock markets in China, and that absurdly huge IPO underpricing is at least partially due to a relatively small aggregate supply of shares. While the lasting and huge IPO underpricing can benefit firms to finance capital with ease from the capital market, abnormally high returns in Chinese IPO markets have caused some expected problems.…”

Section: ⅰ Introductionmentioning

confidence: 99%

The Information Effect of Time-span and Magnitude of Returns on Underpricing, Volume and Cycles in the IPO Market: An Empirical Analysis on Chinese Stock Market

Tan¹,

Kim²

2016

Glob Bus Financ Rev

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A B S T R A C TThis study addresses two puzzles in the IPO markets in China: whether underpricing in the IPO market is affected by earlier market information, especially the volume and number of IPOs in the prior period, and whether underpricing in the previous period leads to a subsequent hot period in the IPO markets in China.The main results of this study are as follows. First, while that the magnitudes of weighted (equally or value weighted) IPO volumes in the past have a positive effect on the magnitude of IPO returns in the future, the IPO volume itself has a negative effect on the magnitude of IPO returns in the future. Second, the magnitude of weighted IPO returns in the past has a positive effect on the magnitude of IPO returns, while simultaneously reflecting the effects of both time-span and magnitude in returns and volume. Third, as higher market returns and larger numbers of IPOs only result in more IPOs in the subsequent period during the period before 2004, whereas this phenomenon has since reversed.

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An empirical investigation of underpricing in Chinese IPOs

Cited by 205 publications

References 14 publications

Ownership Structure and Firm Value in China's Privatized Firms: 1991–2001

Ownership Structure and Firm Value in China's Privatized Firms: 1991–2001

Share Issuing Privatizations in China: Determinants of Public Share Allocation and Underpricing

The Information Effect of Time-span and Magnitude of Returns on Underpricing, Volume and Cycles in the IPO Market: An Empirical Analysis on Chinese Stock Market

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