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Operating Performance and Its Relationship to Market Performance of Chinese Initial Public Offerings

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  • Jing Chi
  • Carol Padgett

Abstract

We investigate the operating performance changes of initial public offerings (IPOs) and the relation between operating performance and both short-run underpricing and long-run market returns of IPOs. We find that listing causes a significant deterioration in profitability, sales-growth rates, and efficiency, and brings a significant increase in sales and a significant decrease in leverage. We also find underpricing has insignificant explanatory power in predicting post-issue operating performance, which suggests that the signaling hypothesis does not explain underpricing very well in Chinese IPO markets. Using a cross-sectional analysis, we find firms with higher return on assets (ROA), smaller size (lower sales), higher sales-growth rates, higher asset turnover, and higher debt-to-asset ratios enjoy higher long-run market returns.

Suggested Citation

  • Jing Chi & Carol Padgett, 2006. "Operating Performance and Its Relationship to Market Performance of Chinese Initial Public Offerings," Chinese Economy, Taylor & Francis Journals, vol. 39(5), pages 28-50, October.
    • Handle: RePEc:mes:chinec:v:39:y:2006:i:5:p:28-50
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    Cited by:

    1. Wu, Xihao & Shen, Yuezhe & Sun, Yani, 2024. "Can the registration system reform improve the disclosure quality?——Evidence from the ChiNext board," Journal of Contemporary Accounting and Economics, Elsevier, vol. 20(2).
    2. Shikha Bhatia & Balwinder Singh, 2012. "Examining the Performance of IPOs," Management and Labour Studies, XLRI Jamshedpur, School of Business Management & Human Resources, vol. 37(3), pages 219-251, August.
    3. Li, Donghui & Moshirian, Fariborz & Nguyen, Pascal & Tan, Li-Wen, 2007. "Managerial ownership and firm performance: Evidence from China's privatizations," Research in International Business and Finance, Elsevier, vol. 21(3), pages 396-413, September.
    4. Chi, Jing & McWha, Matthew & Young, Martin, 2010. "The performance and the survivorship of New Zealand IPOs," International Review of Financial Analysis, Elsevier, vol. 19(3), pages 172-180, June.
    5. Laokulrach Marisa, 2019. "Operating performance of SMEs in Thailand after going public," Management & Marketing, Sciendo, vol. 14(1), pages 1-13, March.
    6. Nan Zhou, 2018. "Hybrid State-Owned Enterprises and Internationalization: Evidence from Emerging Market Multinationals," Management International Review, Springer, vol. 58(4), pages 605-631, August.

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