TITLE:
Empirical Study on the Performance of Initial Public Offerings in China
AUTHORS:
Peng Liang
KEYWORDS:
Initial Public Offering, Long-run Performance, Market Efficiency
JOURNAL NAME:
Journal of Service Science and Management,
Vol.1 No.2,
September
23,
2008
ABSTRACT: We study the long-run performance of 166 IPOs listed on China’s Shanghai Stock Exchanges from 2000 to 2002. We find that the average market-adjusted cumulative return and buy-and-hold return over the three years after listing are -32.02% and -20.88%, which are both significantly negative. What’s more, as an additional robustness check, we cal-culate wealth relatives. One year after listing, WR less than 1 and we obtain a three-year wealth relative of 0.6826, consistent with the CAR and BHAR estimates. We then use a cross-sectional analysis to explain the long-run underper-formance of Chinese IPOs. The results show that the aftermarket performance is positive after listing (6 months) but thereafter returns decline. Buying A-share IPOs immediately after listing and holding the investment for three years results in negative returns and wealth relatives less than one.