An Examination of the Underpricing of H-Share IPOs in Hong Kong

Terence Tai Leung Chong, Shuo Yuan and Isabel Kit-Ming Yan ()
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Shuo Yuan: Department of Economics, The Chinese University of Hong Kong, Shatin, New Territories, Hong Kong
Isabel Kit-Ming Yan: Department of Economics and Finance, City University of Hong Kong, Tat Chee Avenue, Kowloon, Hong Kong

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2010, vol. 13, issue 04, 559-582

Abstract: The main purpose of this paper is to study the empirical determinants of the underpricing of H-share initial public offerings (IPOs) during the 1993–2003 period. A special characteristic of H-shares is that they are shares of companies incorporated in China, but are also listed abroad. Our estimates indicate that the average IPO underpricing level of H-shares was about 16.8%. We find that the conventional explanations for the worldwide IPO underpricing are not adequate in explaining the underpricing level of H-shares. Some new factors that are important in explaining the underpricing phenomenon in H-shares are identified. We show that the degree of IPO underpricing is positively associated with market conditions prior to issuance. It is also negatively related to the range of the issuing prices as well as to the growth rate of historical profits. In addition, it is found that firms cross-listed in Hong Kong and America have higher underpricing levels.

Keywords: Underpricing; IPO; H-share; prospectus (search for similar items in EconPapers)
JEL-codes: G1 G2 G3 (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (7)

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DOI: 10.1142/S0219091510002074

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