An Empirical Analysis on IPO Underpricing and Performance of Newly Privatized Firms in China

Sangphill Kim, Meng Rui and Peter Xu
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Sangphill Kim: Department of Finance, College of Management, University of Massachusetts, Lowell, USA
Meng Rui: Department of Accountancy, Hong Kong Polytechnic University, China
Peter Xu: Prudential Investments, USA

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 1998, vol. 01, issue 04, 461-479

Abstract: Using 45 Initial Public Offerings (IPOs) on the Shanghai Stock Exchange in 1993, we find that the average initial period return is 594 percent or 2.44 percent per day between the offer date and the listing date. Our results support the political persuasion hypothesis that has been postulated in previous studies on IPOs in other emerging markets. An IPO in China is also a newly privatized firm. Based on a subset of the IPO sample, we find significant increases in profitability and productivity after privatization. But the improvement in performance is not strongly related to the percentage of total shares retained or controlled by the government.

JEL-codes: G1 G2 G3 (search for similar items in EconPapers)
Date: 1998
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DOI: 10.1142/S0219091598000272

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