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The mispricing of transportation initial public offerings in the Chinese mainland and Hong Kong

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  • Kevin Cullinane
  • Xihe Gong

Abstract

The main objective of this study is to determine the level of mispricing of transportation IPOs in the Chinese mainland and Hong Kong. A subsidiary objective is to test the hypothesis that there is a strong positive correlation between the initial day returns that are required for new equity issues and the level of ex ante uncertainty associated with the IPO. By applying a standard methodology in finance for assessing the existence and scale of mispricing, the study finds significant underpricing for transportation IPOs in the Chinese mainland and Hong Kong. There is also evidence that freight-related IPOs are subject to more severe underpricing than non-freight related IPOs, and that water-transport IPOs are underpriced more than IPOs of other types of transport business. It is concluded that there does exist support for the hypothesis that the level of ex ante uncertainty is strongly associated with the level of mispricing and that this explains cross-sectional differences in the degree of underpricing of IPOs. In this respect, the results from the Chinese mainland and Hong Kong are consistent with the results of similar studies conducted elsewhere.

Suggested Citation

  • Kevin Cullinane & Xihe Gong, 2002. "The mispricing of transportation initial public offerings in the Chinese mainland and Hong Kong," Maritime Policy & Management, Taylor & Francis Journals, vol. 29(2), pages 107-118, April.
    • Handle: RePEc:taf:marpmg:v:29:y:2002:i:2:p:107-118
    DOI: 10.1080/03088830110067348
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    Cited by:

    1. Alexandridis, George & Kavussanos, Manolis G. & Kim, Chi Y. & Tsouknidis, Dimitris A. & Visvikis, Ilias D., 2018. "A survey of shipping finance research: Setting the future research agenda," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 115(C), pages 164-212.
    2. Satta, Giovanni & Notteboom, Theo & Parola, Francesco & Persico, Luca, 2017. "Determinants of the long-term performance of initial public offerings (IPOs) in the port industry," Transportation Research Part A: Policy and Practice, Elsevier, vol. 103(C), pages 135-153.
    3. Grace W.Y. Wang & Su-Han Woo & Joan Mileski, 2014. "The relative efficiency and financial risk assessment of shipping companies," Maritime Policy & Management, Taylor & Francis Journals, vol. 41(7), pages 651-666, December.
    4. Hyo-Won Kang & Grace W Y Wang & Hee-Seok Bang & Su-Han Woo, 2016. "Economic performance and corporate financial management of shipping firms," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 18(3), pages 317-330, September.
    5. Grammenos, Costas Th. & Papapostolou, Nikos C., 2012. "US shipping initial public offerings: Do prospectus and market information matter?," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 48(1), pages 276-295.
    6. Giovanni Satta, 2017. "Initial public offerings in the port industry: exploring the determinants of underpricing," Maritime Policy & Management, Taylor & Francis Journals, vol. 44(8), pages 1012-1033, November.

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