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Operating Performance and Its Relationship to Market Performance of Chinese Initial Public Offerings

Listed author(s):
  • Jing Chi
  • Carol Padgett
Registered author(s):

    We investigate the operating performance changes of initial public offerings (IPOs) and the relation between operating performance and both short-run underpricing and long-run market returns of IPOs. We find that listing causes a significant deterioration in profitability, sales-growth rates, and efficiency, and brings a significant increase in sales and a significant decrease in leverage. We also find underpricing has insignificant explanatory power in predicting post-issue operating performance, which suggests that the signaling hypothesis does not explain underpricing very well in Chinese IPO markets. Using a cross-sectional analysis, we find firms with higher return on assets (ROA), smaller size (lower sales), higher sales-growth rates, higher asset turnover, and higher debt-to-asset ratios enjoy higher long-run market returns.

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    Article provided by M.E. Sharpe, Inc. in its journal Chinese Economy.

    Volume (Year): 39 (2006)
    Issue (Month): 5 (October)
    Pages: 28-50

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    Handle: RePEc:mes:chinec:v:39:y:2006:i:5:p:28-50
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