Empirical Study on the Performance of Initial Public Offerings in China

Peng Liang

Graduate School of Economics and Business Administration, Hokkaido University, Japan, 060-0809.

DOI: 10.4236/jssm.2008.12014                

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.

Keywords

Initial Public Offering, Long-run Performance, Market Efficiency

Conflicts of Interest

The authors declare no conflicts of interest.

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