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The impact of pricing mechanism reform on underpricing of initial public offerings in China

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  • Danlin Pu
  • Shanping Wang

Abstract

Using a sample of initial public offerings (IPOs) (A-shares) at the Shanghai Securities Exchange from 2003 to 2007, we examine the effect of introducing the bookbuilding method upon IPO underpricing in China. The results show that after the pricing mechanism reform, the underpricing of IPOs was significantly higher than that of fixed price offerings. The possible reason is that underwriters have no discretionary allocation in the hybrid bookbuilding/open offer method.

Suggested Citation

  • Danlin Pu & Shanping Wang, 2015. "The impact of pricing mechanism reform on underpricing of initial public offerings in China," Applied Economics Letters, Taylor & Francis Journals, vol. 22(14), pages 1144-1149, September.
    • Handle: RePEc:taf:apeclt:v:22:y:2015:i:14:p:1144-1149
    DOI: 10.1080/13504851.2015.1011303
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    References listed on IDEAS

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    8. FranÁois Derrien & Kent L. Womack, 2003. "Auctions vs. Bookbuilding and the Control of Underpricing in Hot IPO Markets," Review of Financial Studies, Society for Financial Studies, vol. 16(1), pages 31-61.
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    Cited by:

    1. Dr. Aniruddha DAS & Dr. Amith Vikram MEGARAVALLI & Dr. A. Sarath BABU, 2023. "What drives the oversubscription of IPO’s: evidence from Indian Stock Market," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(4(637), W), pages 47-62, Winter.
    2. Azevedo, Alcino & Guney, Yilmaz & Leng, Jingsi, 2018. "Initial public offerings in China: Underpricing, statistics and developing literature," Research in International Business and Finance, Elsevier, vol. 46(C), pages 387-398.

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