2022/11/24 by Yiming Qian, Jay R. Ritter, Xinjian Shao · 1 citation
Business, Management and Accounting · Economics, Econometrics and Finance · #Corporate Finance and Governance #Financial Markets and Investment Strategies #Private Equity and Venture Capital
paper · pdf · doi:10.1017/s002210902200134x
Abstract This article provides a survey of China’s initial public offering (IPO) market, focusing on IPO pricing, bids and allocation, and aftermarket trading. We show that strict regulations result in suppressed IPO offer prices and high initial returns, causing a high cost of going public. Investors treat IPOs as lotteries with extremely high short-term returns, with little attention to the long term. The auction selling method, however, works in the way it is supposed to. Mutual funds bid in a more informative way than other investors, and their advantages are unlikely to be due to underwriters’ preferential treatment. We also discuss the latest registration-system reform.