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An Empirical Analysis on IPO Underpricing and Performance of Newly Privatized Firms in China

Author

Listed:
  • Sangphill Kim

    (Department of Finance, College of Management, University of Massachusetts, Lowell, USA)

  • Meng Rui

    (Department of Accountancy, Hong Kong Polytechnic University, China)

  • Peter Xu

    (Prudential Investments, USA)

Abstract

Using 45 Initial Public Offerings (IPOs) on the Shanghai Stock Exchange in 1993, we find that the average initial period return is 594 percent or 2.44 percent per day between the offer date and the listing date. Our results support the political persuasion hypothesis that has been postulated in previous studies on IPOs in other emerging markets. An IPO in China is also a newly privatized firm. Based on a subset of the IPO sample, we find significant increases in profitability and productivity after privatization. But the improvement in performance is not strongly related to the percentage of total shares retained or controlled by the government.

Suggested Citation

  • Sangphill Kim & Meng Rui & Peter Xu, 1998. "An Empirical Analysis on IPO Underpricing and Performance of Newly Privatized Firms in China," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 1(04), pages 461-479.
    • Handle: RePEc:wsi:rpbfmp:v:01:y:1998:i:04:n:s0219091598000272
    DOI: 10.1142/S0219091598000272
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    Citations

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    Cited by:

    1. Yu, Ting & Tse, Y.K., 2006. "An empirical examination of IPO underpricing in the Chinese A-share market," China Economic Review, Elsevier, vol. 17(4), pages 363-382.
    2. 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.

    More about this item

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance

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