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ChiNext IPOs' initial returns before and after the 2013 stock market reform: What can we learn?

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  • Zhou, Zhong-guo
  • Hussein, Monica
  • Deng, Qi

Abstract

We examine ChiNext IPOs' performance before and after the 2013 stock market reform. Majority of firm-level characteristics differ significantly over the two sub-periods. The initial return looks normal before the reform. It exhibits a uniform distribution truncated at the maximum 44% initial cap imposed by the reform thereafter and the cumulative return, based on listing day closing price keeps rising at a steady pace over the 1st month. The 2013 reform pushes the ChiNext IPO market off its track of becoming more efficient. Instead, it widens income gap in China. Our findings and recommendations support the 2020 new regulatory changes.

Suggested Citation

  • Zhou, Zhong-guo & Hussein, Monica & Deng, Qi, 2021. "ChiNext IPOs' initial returns before and after the 2013 stock market reform: What can we learn?," Emerging Markets Review, Elsevier, vol. 48(C).
    • Handle: RePEc:eee:ememar:v:48:y:2021:i:c:s156601412100025x
    DOI: 10.1016/j.ememar.2021.100817
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    References listed on IDEAS

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    Cited by:

    1. Qi Deng & Lunge Dai & Zixin Yang & Zhong-guo Zhou & Monica Hussein & Dingyi Chen & Mick Swartz, 2022. "The Impact of Regulation Regime Changes on ChiNext IPOs: Effects of 2013 and 2020 Reforms on Pricing and Overreaction," Papers 2212.11779, arXiv.org.
    2. Achakzai, Muhammad Atif Khan & Juan, Peng, 2022. "Using machine learning Meta-Classifiers to detect financial frauds," Finance Research Letters, Elsevier, vol. 48(C).
    3. Deng, Qi & Dai, Lunge & Yang, Zixin & Zhou, Zhong-Guo & Hussein, Monica & Chen, Dingyi & Swartz, Mick, 2023. "The impacts of regulation regime changes on ChiNext IPOs: Effects of 2013 and 2020 reforms on initial return, fair value and overreaction," International Review of Financial Analysis, Elsevier, vol. 89(C).
    4. Qi Deng & Linhong Zheng & Jiaqi Peng & Xu Li & Zhong-guo Zhou & Monica Hussein & Dingyi Chen & Mick Swartz, 2023. "The Impacts of Registration Regime Implementation on IPO Pricing Efficiency," Papers 2307.09669, arXiv.org.
    5. Achakzai, Muhammad Atif Khan & Peng, Juan, 2023. "Detecting financial statement fraud using dynamic ensemble machine learning," International Review of Financial Analysis, Elsevier, vol. 89(C).

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    More about this item

    Keywords

    Stock market reform; IPOs' initial returns; cumulative returns and return volatility; Market efficiency versus even income distribution; A less-regulated; more transparent; efficient and market-oriented IPO environment;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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