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

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Author Info
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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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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Handle: RePEc:nbr:nberwo:9574

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G1 - Financial Economics - - General Financial Markets
G3 - Financial Economics - - Corporate Finance and Governance

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  1. 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. [Downloadable!] (restricted)
  2. 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. [Downloadable!] (restricted)
  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. [Downloadable!] (restricted)
  4. North, Douglass C, 1994. "Economic Performance through Time," American Economic Review, American Economic Association, vol. 84(3), pages 359-68, June.
  5. North, Douglass C, 1991. "Institutions," Journal of Economic Perspectives, American Economic Association, vol. 5(1), pages 97-112, Winter. [Downloadable!] (restricted)
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