What comprises IPO initial returns: Evidence from the Chinese market

Yan Gao (First Author)

    Research output: Contribution to journalJournal

    31 Citations (Web of Science)


    We studied the IPO price and long-term performance in China after the adoption of the book-building pricing mechanism. Using comparable firm value, we separated the IPO initial returns into pre-market deliberate underpricing and aftermarket overpricing. This separation enables us to clearly test different theories regarding high IPO initial returns. We find little evidence supporting the classic information theory on IPO underpricing but strong evidence supporting the behavioral arguments regarding IPO overpricing. Even though the results are specific to the Chinese market, we find some general results on what composes and drives IPO initial returns that have been lacking in the IPO literature.
    Original languageEnglish
    Pages (from-to)77-89
    JournalPacific-Basin Finance Journal
    Issue number1
    Publication statusPublished - 2010

    Corresponding author email



    • Behavioral finance
    • China's stock markets
    • IPOs
    • Underpricing

    Indexed by

    • ABDC-A
    • Scopus
    • SSCI


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