Credit scores and the performance of newly-listed stocks: an exploration of the Chinese A-share market

Charlie X. Cai (), Paul B. McGuinness () and Qi Zhang ()
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Charlie X. Cai: University of Liverpool
Paul B. McGuinness: The Chinese University of Hong Kong
Qi Zhang: Durham University

Review of Quantitative Finance and Accounting, 2018, vol. 51, issue 1, No 4, 79-111

Abstract: Abstract This study assesses the power of S&P Global Market Intelligence’s CreditModel (CM) scores in explaining the short- and long-run performance of newly-listed Chinese firms. A unique feature of the data arises from such scores being outside the public domain during the study period. Focus on such a period avoids the signalling and self-selection biases that inevitably plague studies delving into the relevance of publicly-announced credit ratings. We find that CM scores exhibit positive association with post-listing buy-and-hold stock returns. Even stronger associations emerge when considering fundamental accounting performance, especially over longer-run horizons. In respect of the listing of Chinese A-share firms, we conjecture that greater alignment between secondary market prices and fundamentals would likely have arisen had such scores been in the public domain during the study period.

Keywords: Credit score; IPO pricing; Post IPO performance (search for similar items in EconPapers)
JEL-codes: G24 G31 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s11156-017-0664-7

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