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China's IPO activity and equity market volatility

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  • Frank Packer
  • Mark M. Spiegel

Abstract

China has recently considered reforming its regulation of initial public offerings in equity markets. Current policy allows more IPOs in rising markets but restricts new issues in falling markets, possibly to avoid pushing down values of existing stocks. However, recent research finds China?s IPO activity has no effect on stock price changes, perhaps because of the low volume relative to the overall market. As such, cyclical restrictions on IPOs do not appear to have stabilized Chinese markets, so policy reforms may improve market efficiency without increasing volatility.

Suggested Citation

  • Frank Packer & Mark M. Spiegel, 2016. "China's IPO activity and equity market volatility," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
    • Handle: RePEc:fip:fedfel:00096
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    References listed on IDEAS

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    1. Hamao, Yasushi & Packer, Frank & Ritter, Jay R., 2000. "Institutional affiliation and the role of venture capital: Evidence from initial public offerings in Japan," Pacific-Basin Finance Journal, Elsevier, vol. 8(5), pages 529-558, October.
    2. Matías Braun & Borja Larrain, 2009. "Do IPOs Affect the Prices of Other Stocks? Evidence from Emerging Markets," Review of Financial Studies, Society for Financial Studies, vol. 22(4), pages 1505-1544, April.
    3. Helwege, Jean & Liang, Nellie, 2004. "Initial Public Offerings in Hot and Cold Markets," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 39(3), pages 541-569, September.
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    Cited by:

    1. Markus K Brunnermeier & Michael Sockin & Wei Xiong, 2022. "China’s Model of Managing the Financial System [Beauty Contests and Iterated Expectations in Asset Markets]," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 89(6), pages 3115-3153.
    2. Lin William Cong & Sabrina T. Howell, 2021. "Policy Uncertainty and Innovation: Evidence from Initial Public Offering Interventions in China," Management Science, INFORMS, vol. 67(11), pages 7238-7261, November.
    3. Zhang, Jinjin & Chen, Huili & Zhang, Pengdong & Jiang, Min, 2022. "Product market competition and the value of corporate cash: An agency theory explanation," International Review of Financial Analysis, Elsevier, vol. 84(C).
    4. Lin, Xiaowei & Li, Ao & Zhang, Pengdong & Chen, Wenchuan, 2023. "The disciplinary role of product market competition on cash holding," International Review of Economics & Finance, Elsevier, vol. 83(C), pages 653-671.

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