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Investor sentiment, issuance cost, and IPO underpricing: an empirical analysis of Shanghai Stock Exchange A-shares

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  • Yueqi Wang
  • Jingjing Yao

Abstract

As the Chinese financial market has recently opened to the world, the high initial public offering (IPO) underpricing rate in the stock market has generated significant concern. This study investigates the impact of investor sentiment and issuing cost on the IPO underpricing rate after listing in various periods. We use the Shanghai Stock Exchange (SSE) A-shares data from 2014 to 2018 and the ordinary least squares (OLS) method to conduct the analysis. The results indicate that, in the first phases, investor sentiment is positively correlated, while the issuance cost is negatively correlated to the IPO underpricing rate. After the company’s listing, investor sentiment gradually becomes the main factor affecting the IPO underpricing rate, and its positive impact increases, while the negative impact of the issuance cost weakens slightly.

Suggested Citation

  • Yueqi Wang & Jingjing Yao, 2021. "Investor sentiment, issuance cost, and IPO underpricing: an empirical analysis of Shanghai Stock Exchange A-shares," Applied Economics Letters, Taylor & Francis Journals, vol. 28(6), pages 508-511, March.
    • Handle: RePEc:taf:apeclt:v:28:y:2021:i:6:p:508-511
    DOI: 10.1080/13504851.2020.1761530
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