TY - JOUR
T1 - What comprises IPO initial returns: Evidence from the Chinese market
AU - Gao, Yan
PY - 2010
Y1 - 2010
N2 - 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.
AB - 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.
KW - Behavioral finance
KW - China's stock markets
KW - IPOs
KW - Underpricing
KW - Behavioral finance
KW - China's stock markets
KW - IPOs
KW - Underpricing
UR - https://www.webofscience.com/api/gateway?GWVersion=2&SrcApp=ceibs_wosapi&SrcAuth=WosAPI&KeyUT=WOS:000273734400005&DestLinkType=FullRecord&DestApp=WOS
U2 - 10.1016/j.pacfin.2009.08.001
DO - 10.1016/j.pacfin.2009.08.001
M3 - Journal
SN - 0927-538X
VL - 18
SP - 77
EP - 89
JO - Pacific-Basin Finance Journal
JF - Pacific-Basin Finance Journal
IS - 1
ER -