 The impact of IPO approval on the price of existing stocks: Evidence from ChinaYuanpeng Li, Qian Sun and Shu Tian Journal of Corporate Finance, 2018, vol. 50, issue C, 109-127 Abstract: This paper investigates whether initial public offering (IPO) announcements have any price impact on existing stocks in China. Using the Chinese IPO approval regime as a natural experiment, we find that IPO approval announcements have a negative price impact on stocks. This price effect appears to be a drift in equilibrium prices and is more pronounced on stocks that are more correlated with the IPO. These findings support an expectation-based downward-sloping demand curve hypothesis. We also document negative price reactions around the IPO listing day, which is consistent with the findings by previous authors. Further evidence rules out the signal effect of IPO approval announcements. In sum, IPO approvals can influence prices of other stocks by shaping the expectation of a change in the supply-demand equilibrium without actual trading of IPO shares. Keywords: IPO approval; Downward-sloping demand curve; Cross-stock price effect (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:50:y:2018:i:c:p:109-127 DOI: 10.1016/j.jcorpfin.2018.03.002 Access Statistics for this article Journal of Corporate Finance is currently edited by A. Poulsen and J. Netter More articles in Journal of Corporate Finance from Elsevier |
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