R&D investment, IPO underpricing, investor sentiment and long-term performance: A study on the Chinese star market

Menghan Li () and Fengyu Zhao ()

Asian Development Policy Review, 2025, vol. 13, issue 2, 210-223

Abstract: This study examines the factors influencing sustained post-IPO performance in China’s STAR Market, emphasizing the combined effects of R&D expenditure, IPO underpricing, and investor sentiment on long-term outcomes in this innovation-driven exchange. Using event study analysis and multiple regression, the research evaluates 342 companies listed between July 2019 and December 2021. Long-term performance is measured via one-year cumulative abnormal returns (CAR) and buy-and-hold abnormal returns (BHAR). R&D expenditure significantly enhances long-term performance for non-high-tech firms by signaling growth potential in environments with limited information. High-tech firms, however, show minimal incremental gains, as market expectations pre-price their innovative status. IPO underpricing consistently correlates negatively with long-term performance across sectors, indicating agency costs or adverse signaling. Investor sentiment, proxied by initial trading turnover, exerts negligible lasting impact, revealing a disconnect between speculative activity and sustained valuation. Sector-specific R&D signaling and IPO underpricing risks drive long-term outcomes. Market expectations dominate pre-IPO valuations for high-tech firms, while short-term speculation fails to predict enduring performance. Firms should align R&D strategies with sector-specific valuation drivers. Investors must prioritize fundamentals over transient hype. Policymakers can enhance market efficiency by fostering transparency and incentivizing innovation, particularly in non-high-tech sectors, to support sustainable growth in emerging markets.

Keywords: Chinese STAR market; Event study; Initial public offering; Long-term performance; R&D investment; Investor sentiment; Information asymmetry; Signaling theory; High-tech firms; Underpricing. (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://archive.aessweb.com/index.php/5008/article/view/5447/8302 (application/pdf)

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:asi:adprev:v:13:y:2025:i:2:p:210-223:id:5447

Access Statistics for this article

More articles in Asian Development Policy Review from Asian Economic and Social Society
Bibliographic data for series maintained by Robert Allen ().