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IPO underpricing in China: New evidence from the primary and secondary markets

  • Chang, Eddy
  • Chen, Chao
  • Chi, Jing
  • Young, Martin

This paper divides Chinese A-Share IPO initial returns into the initial return in the primary market and in the secondary market. Our empirical evidence shows that the initial abnormal return in the secondary market is significantly positive. This study also finds that 1) the initial return in the primary market is negatively related to the subscription or lottery ratio; 2) the initial return in the secondary market is positively related to the market return, and negatively related to IPO offering prices; 3) the initial turnover is negatively related to the offering size; 4) the initial turnover has no impact on the initial return in the secondary market but the latter has a significantly positive influence on the initial turnover.

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Article provided by Elsevier in its journal Emerging Markets Review.

Volume (Year): 9 (2008)
Issue (Month): 1 (March)
Pages: 1-16

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Handle: RePEc:eee:ememar:v:9:y:2008:i:1:p:1-16
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/620356

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  15. Schultz, Paul H. & Zaman, Mir A., 1994. "Aftermarket support and underpricing of initial public offerings," Journal of Financial Economics, Elsevier, vol. 35(2), pages 199-219, April.
  16. Chi, Jing & Padgett, Carol, 2005. "Short-run underpricing and its characteristics in Chinese initial public offering (IPO) markets," Research in International Business and Finance, Elsevier, vol. 19(1), pages 71-93, March.
  17. Ibbotson, Roger G., 1975. "Price performance of common stock new issues," Journal of Financial Economics, Elsevier, vol. 2(3), pages 235-272, September.
  18. Baron, D. P. & Holmström, B. R., 1980. "Abstract: The Investment Banking Contract for New Issues Under Asymmetric Information: Delegation and the Incentive Problem," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 15(04), pages 851-851, November.
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