Publication Type

Journal Article

Version

publishedVersion

Publication Date

9-2003

Abstract

In this paper we examine the relationship between performance of the Chinese IPO firms and the reputation of investment bankers underwriting their stocks. Similar to previous studies on well-developed stock markets, we find that the initial return on the first day of trading is strongly positive for Chinese IPO stocks due to underpricing. This initial return is negatively related to the underwriter's reputation, suggesting that the better the reputation of the underwriter, the less underpricing and hence, the lower the initial return of the IPO stock. Extending the analysis to a ten-day window after the first trading day, we find that the cumulative return becomes negative but that the stocks with more prestigious underwriters experience less decline. We also examine the three-year return of the IPOs. Contrary to previous findings, we find a positive long-run return for the Chinese IPO stocks. This long-run return is positively correlated with underwriter reputation. Finally, we find some evidence of positive long-run operating performance for the IPO firms that employ more prestigious underwriters.

Keywords

IPO, Stock Market, Stocks, China

Discipline

Asian Studies | Business | Finance and Financial Management

Research Areas

Finance

Publication

Journal of Entrepreneurial Finance

Volume

8

Issue

3

First Page

17

Last Page

41

ISSN

2373-1753

Publisher

Pepperdine University, Graziadio School of Business and Management

Copyright Owner and License

Authors

Download

Share

COinS