What comprises IPO initial returns: Evidence from the Chinese market

Gao, Yan

doi:10.1016/j.pacfin.2009.08.001

Cited by 73 publications

(50 citation statements)

References 30 publications

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“…Tian (2011) also finds extremely high underpricing of 247% in a sample of 1377 IPOs from 1992 to 2004 and argues that information asymmetry is far from being a major determinant. Similarly, Gao (2010) finds no significant relationship between the initial returns and proxies for information asymmetry.…”

Section: Literature Reviewmentioning

confidence: 92%

“…The underpricing of initial public offerings (IPOs) in emerging markets is significant and previous research applying models used in developed markets has failed to explain this phenomenon and its cross-sectional variation-see Mok and Hui (1998), Chan et al (2004), Gao (2010) and Tian (2011). In fact, most studies suggest that IPO underpricing is a result of the issuing firm's valuation and IPO underwriting process.…”

Section: Introductionmentioning

confidence: 99%

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Urban Economic Openness and IPO Underpricing

Marcato

Milcheva

Zheng

2017

J Real Estate Finan Econ

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This paper represents a first attempt to employ a macroeconomic approach to explain the high and varying IPO underpricing within a single emerging market. We examine the empirical impact of trade openness on the short-run underpricing of initial public offerings (IPOs) using city-level data. Particularly, we argue that urban economic openness (UEO) has a significant impact on the productivity and on prices of both direct and indirect real estate due to productivity gains of companies in more open areas. This in turn positively affects the firm's profitability, enhancing the confidence in local real estate markets and future company performance, hence decreasing the uncertainty of the IPO valuation. As a result, issuers have less incentive to underprice IPO shares. We use a sample of Chinese real estate IPOs, which offer a suitable laboratory thanks to their strong geographic investment patterns focused locally and a country with a highly heterogeneous openness across regions. Controlling for traditional firm-and issuing-specific characteristics of IPOs that are used for developed markets and Chinese-related features (i.e. listing location and state ownership), we find the evidence that companies investing in economically more open areas experience less IPO underpricing. Our results show great explanatory power and are robust to different specifications.

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Section: Literature Reviewmentioning

confidence: 92%

Section: Introductionmentioning

confidence: 99%

Urban Economic Openness and IPO Underpricing

Marcato

Milcheva

Zheng

2017

J Real Estate Finan Econ

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“…Likewise the work of Cornelli et al (2006) indicates that retail investor sentiment drives first day returns of IPOs in twelve European countries. Gao (2010) shows market sentiment is a key driver of initial returns in the Chinese IPO market. There is also evidence that issuers time the issuance of IPOs when the sentiment demand is strong (Ritter, 1984(Ritter, , 1991Baker and Wurgler, 2000;Loughran et al, 1994;Lee et al, 1991).…”

Section: Literature Reviewmentioning

confidence: 99%

“…Although several researchers have used offer price range i to explain offer price adjustment and initial listing return (Hanley, 1993;Gao, 2010), there is as yet no work on the determinants of the price range which is essential to commence the bookbuilding process. Therefore, in this paper, using data from the Indian IPO market, we examine the factors that determine the price range in a bookbuilding process.…”

Section: Introductionmentioning

confidence: 99%

Investor Sentiment, Profitability and Offer Price Band: Evidence from the Indian IPO Market

Krishnamurti

Pensiero²

2014

GEFJ

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“…Their principal finding is that the run-up in secondary market price on first listing day often takes place 7 . For the mainland Chinese market-place, see Chi and Padget (2005a), Gao (2010), Chan and Lo (2011), Gounopoulos et al (2013), Jiang et al (2014) and Song et al (2014). In relation to the post-IPO performance of Alisted firms, see Chen et al (2000), Sun and Tong (2003), Chan et al (2004), Fan et al (2007), Cai et al (2008), Chi et al (2010) and Chan and Lo (2011).…”

mentioning

confidence: 99%

Credit scores and the performance of newly-listed stocks: an exploration of the Chinese A-share market

Cai

McGuinness

Zhang

2017

Rev Quant Finan Acc

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Acknowledgements:We thank S&P Global Market Intelligence for the provision of Credit Model (CM) scores necessary for the completion of this study. This project developed from a request by S&P in February 2014 to assess the power of CM scores in explaining post-IPO performance. Our investigation offers a framework for assessing this question as well as other related themes. We especially thank Clemens Thym, Michelle P. Cheong and Phillip Lee of S&P Global Market Intelligence for earlier discussions, suggestions and input. Additionally, we express thanks to Daniel Chan and Jack Wong.We also thank an anonymous reviewer for comments rendered on an earlier draft of this paper. We find that CM scores exhibit positive association with post-listing buy-and-hold stock returns. Even stronger associations emerge when considering fundamental accounting performance, especially over longer-run horizons. In respect of the listing of Chinese Ashare firms, we conjecture that greater alignment between secondary market prices and fundamentals would likely have arisen had such scores been in the public domain during the study period.

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What comprises IPO initial returns: Evidence from the Chinese market

Cited by 73 publications

References 30 publications

Urban Economic Openness and IPO Underpricing

Urban Economic Openness and IPO Underpricing

Investor Sentiment, Profitability and Offer Price Band: Evidence from the Indian IPO Market

Credit scores and the performance of newly-listed stocks: an exploration of the Chinese A-share market

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