Publication Type
Journal Article
Version
acceptedVersion
Publication Date
1-2006
Abstract
Research in the literature shows that initial public offerings (IPOs) of common stocks are systematically priced at a discount to their subsequent initial trading price. The large underpricing magnitude in the Chinese IPO market has attracted much attention. We consider three hypotheses that may explain the IPO underpricing in China. These are the winner's curse hypothesis, the ex ante uncertainty hypothesis and the signaling hypothesis. Among these hypotheses, the winner's curse hypothesis has not been tested in the Chinese market. Using IPO data for online fixed-price offerings from November 1995 to December 1998, our results show that the winner's curse hypothesis is the main reason for the high IPO underpricing in China. The signaling hypothesis is not empirically supported in the Chinese market during the sample period.
Keywords
IPO, signaling, strategic underpricing, winner’s curse, China, stock market
Discipline
Asian Studies | Econometrics | Finance
Research Areas
Econometrics
Publication
China Economic Review
Volume
17
Issue
4
First Page
363
Last Page
382
ISSN
1043-951X
Identifier
10.1016/j.chieco.2005.07.001
Publisher
Elsevier
Citation
YU, Ting and TSE, Yiu Kuen.
An Empirical Examination of IPO Underpricing in the Chinese A-Share Market. (2006). China Economic Review. 17, (4), 363-382.
Available at: https://ink.library.smu.edu.sg/soe_research/442
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1016/j.chieco.2005.07.001