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Initial Public Offerings Chinese Style

Author

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  • Qian, Yiming
  • Ritter, Jay R.
  • Shao, Xinjian

Abstract

This article provides a survey of China’s initial public offering (IPO) market, focusing on IPO pricing, bids and allocation, and aftermarket trading. We show that strict regulations result in suppressed IPO offer prices and high initial returns, causing a high cost of going public. Investors treat IPOs as lotteries with extremely high short-term returns, with little attention to the long term. The auction selling method, however, works in the way it is supposed to. Mutual funds bid in a more informative way than other investors, and their advantages are unlikely to be due to underwriters’ preferential treatment. We also discuss the latest registration-system reform.

Suggested Citation

  • Qian, Yiming & Ritter, Jay R. & Shao, Xinjian, 2024. "Initial Public Offerings Chinese Style," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 59(1), pages 1-38, February.
    • Handle: RePEc:cup:jfinqa:v:59:y:2024:i:1:p:1-38_1
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    Citations

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    Cited by:

    1. Shenghao Gao & Peyman Khezr & Armin Pourkhanali, 2024. "Uniform price auctions with pre-announced revenue targets: Evidence from China's SEOs," Papers 2410.00063, arXiv.org.
    2. Gounopoulos, Dimitrios & Loukopoulos, Georgios & Loukopoulos, Panagiotis & Zhang, Yu, 2024. "Do CFO career concerns matter? Evidence from IPO financial reporting outcomes," Journal of Corporate Finance, Elsevier, vol. 87(C).
    3. Tang, Siyuan & Luo, Runmei, 2024. "Price deregulation and investors’ IPO speculation: Evidence from Chinese registration system reform," Research in International Business and Finance, Elsevier, vol. 71(C).

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