Cross-sectional determinants of post-IPO stock performance: evidence from China

This paper examines the cross‐sectional determinants of post‐IPO long‐term stock returns in China. We document that the aftermarket P/E ratio has the most robust negative association with post‐IPO stock returns. The negative relation indicates that the market corrects the aftermarket overvaluation o...

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Bibliographic Details
Published in:Accounting and finance (Parkville) 2010-09, Vol.50 (3), p.581-603
Main Authors: Chang, Xin, Lin, Shi Hua, Tam, Lewis H. K., Wong, George
Format: Article
Language:English
Subjects:
Corporate governance
Correlation analysis
Initial public offerings
Rates of return
Reputations
Studies
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Summary:This paper examines the cross‐sectional determinants of post‐IPO long‐term stock returns in China. We document that the aftermarket P/E ratio has the most robust negative association with post‐IPO stock returns. The negative relation indicates that the market corrects the aftermarket overvaluation of IPO firms in the long run. Underwriter reputation has a positive effect on post‐IPO stock returns, while board size has a negative impact, consistent with the views that reputable underwriters mitigate the information asymmetry in IPO pricing and over‐sized boards reduce the effectiveness of corporate governance. However, we find little evidence indicating that the equity ownership structure is significantly associated with post‐IPO stock returns.
ISSN:0810-5391
1467-629X
DOI:10.1111/j.1467-629X.2009.00333.x