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Initial Public Offering and Corporate Governance in China's Transitional Economy

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  • Chen-Chien Hsun
  • Shih Hui-Tzu

Abstract

This paper empirically investigates the performance of Chinese initial public offerings (IPOs). The data used covers the period from mid-1995 to mid-1999 with the sample including 884 companies (both in the A- and B-share markets). In an examination of growth, profitability and stability of listed companies either individually or as a combination, it can be seen that the only industries in which listed companies in China display strong performance are public utilities, transportation and finance. If one examines the changes in listed companies' financial indicators following the IPO, it becomes apparent that with the exception of earnings related indicators (EPS and ROE) there are no significant changes. What's more, the financial indicators tend to fall rapidly year on year. This means that the IPO is of little obvious help to companies' operational performance, and may actually make things worse. One of the reasons for this is that in order to implement the IPO and secure stock market listing, companies tend to submit inflated figures in the financial statements that they are required to provide. Another possible factor is the poor corporate governance characteristics of Chinese enterprises.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9574.

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Date of creation: Mar 2003
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Publication status: published as Ito, Takatoshi and Anne O. Krueger (eds.) Governance, regulation, and privatization in the Asia-Pacific region NBER-East Asia Seminar on Economics, vol. 12. Chicago and London: University of Chicago Press, 2004.
Handle: RePEc:nbr:nberwo:9574

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  1. Sun, Qian & Tong, Wilson H. S., 2000. "The effect of market segmentation on stock prices: The China syndrome," Journal of Banking & Finance, Elsevier, vol. 24(12), pages 1875-1902, December.
  2. North, Douglass C., 1993. "Economic Performance through Time," Nobel Prize in Economics documents 1993-2, Nobel Prize Committee.
  3. Chen, Jian, 2001. " Ownership Structure as Corporate Governance Mechanism: Evidence from Chinese Listed Companies," Economic Change and Restructuring, Springer, vol. 34(1-2), pages 53-72.
  4. Xu, Cheng Kenneth, 2000. "The microstructure of the Chinese stock market," China Economic Review, Elsevier, vol. 11(1), pages 79-97.
  5. Su, Dongwei & Fleisher, Belton M., 1999. "An empirical investigation of underpricing in Chinese IPOs," Pacific-Basin Finance Journal, Elsevier, vol. 7(2), pages 173-202, May.
  6. Mok, Henry M. K. & Hui, Y. V., 1998. "Underpricing and aftermarket performance of IPOs in Shanghai, China," Pacific-Basin Finance Journal, Elsevier, vol. 6(5), pages 453-474, November.
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Cited by:
  1. Bin Liu, 2011. "The Effects of Public Listing on the Performance of Banks in China," Working Papers 072011, Hong Kong Institute for Monetary Research.
  2. Wang, Changyun, 2005. "Ownership and operating performance of Chinese IPOs," Journal of Banking & Finance, Elsevier, vol. 29(7), pages 1835-1856, July.

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