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《Journal of Manegement Sciences In China》 2001-04
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Empirical investigation of initial returns of Chinas A share IPOs

DU Xin 1,LIANG Hong yun 2,SONG Feng ming 2 1.Business Analyst, McKinsey & Company, Beijing Office, Beijing 100020, China; 2.Economics & Management School, Tsinghua University, Beijing 100084, China  
Very high initial returns can be found in China's A share stock market. In this paper, we empirically identify some of the causes of such high initial returns, using data compiled for 472 A share Initial Public Offerings (IPOs) listed between January 1, 1995 and May 30, 1998. We attribute the high initial returns to the disconnection of the pricing mechanisms between A share stock's primary market and its secondary market. We also find some of the factors that have significant influence on the initial returns, such as the offering price, the time of the IPO, the size of the IPO, and so forth. Our empirical results do not support that the IPO underpricing is due to a separating equilibrium or the government commitment, which has been suggested by some western scholars. Neither do we find any significant long term underperformance within the IPOs we have studied. In addition, there is a vast oversubscription in almost every IPO, which makes the actual return to the subscribers who have been actually allocated some shares of the new issue far less than the nominal initial return. All these phenomena described above are associated with both the stock market's stage of development and the government's regulating policies.
【CateGory Index】: F832.5
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