Are foreign IPOs really foreign? Price efficiency and information asymmetry of Chinese foreign IPOs
Alireza Tourani-Rad,
Aaron Gilbert and
Jun Chen
Journal of Banking & Finance, 2016, vol. 63, issue C, 95-106
Abstract:
We investigate the informational risk and price efficiency of Chinese firms undertaking a foreign IPO on the Hong Kong stock exchange between 1996 and 2012. Specifically, using intraday tick data, we examine the spreads, asymmetric information component of the bid-ask spread, autocorrelations of intraday returns, variance ratios and return predictability of the order flow for foreign IPO firms. We contrast these measures against those of comparable IPO firms on both the Chinese stock exchanges and the Hong Kong stock exchange matched based on the year of IPO, industry and firm size. We find that while the foreign IPO firms largely operate in China, they are generally perceived as having a similar level of information asymmetry and price efficiency as Hong Kong IPO firms. In contrast, IPOs on the Chinese exchanges have much higher proportions of information asymmetry in their spreads and lower price efficiency than foreign IPO firms. Our findings are generally robust to the use of the Heckman two-stage procedure that controls for potential self-selection bias. Our results provide further evidence that it is the location of trading that is important for pricing of firms rather than the location of their business.
Keywords: Foreign IPOs; Trading location; Information asymmetry; Price efficiency (search for similar items in EconPapers)
JEL-codes: G15 G32 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)
Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378426615002174
Full text for ScienceDirect subscribers only
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:63:y:2016:i:c:p:95-106
DOI: 10.1016/j.jbankfin.2015.08.006
Access Statistics for this article
Journal of Banking & Finance is currently edited by Ike Mathur
More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu (repec@elsevier.com).