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Volatile market condition, institutional constraints, and IPO anomaly: evidence from the Chinese market

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  • Mingsheng Li
  • Desheng Liu
  • Jing Zhang
  • Luxiu Zhang

Abstract

We provide a holistic view of factors affecting IPO underpricing and aftermarket trading of Chinese initial public offerings (IPOs) over 23 years. The subscription ratio and offer amount are among the top three most important determinants of underpricing when stock markets are less volatile. However, the recent IPOs’ initial return and institutional constraints on offer price and aftermarket trading price are the driving forces in volatile markets. The underpricing (the first‐day trading price limit) is the most important factor affecting IPO aftermarket trading when stock markets are less (more) volatile, suggesting how factors affect IPO underpricing and aftermarket trading depends on stock market conditions.

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  • Mingsheng Li & Desheng Liu & Jing Zhang & Luxiu Zhang, 2021. "Volatile market condition, institutional constraints, and IPO anomaly: evidence from the Chinese market," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(1), pages 1239-1275, March.
    • Handle: RePEc:bla:acctfi:v:61:y:2021:i:1:p:1239-1275
    DOI: 10.1111/acfi.12609
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    1. Junkun Zhao & Zhe Shen & Yong Huang, 2023. "IPO suspension and pricing: Evidence from China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(5), pages 5143-5182, December.

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