Asymmetric Information and IPO Size of Newly Listed Chinese Companies
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Authors
Miglo, Anton
Wu, Congsheng
Issue Date
2014-03-28
Type
Presentation
Language
en_US
Keywords
Faculty research day , Business , China , Initial public offering (IPO)
Alternative Title
Abstract
We build a model of an IPO for firms with private information about their earnings profile over time and test the model’s predictions using a complete sample of newly listed Chinese companies between 1992 and 2007. The model predicts that IPO size is positively correlated with short-term operating performance that is not directly consistent with traditional theories. It also provides an explanation for negative correlation between debt and profitability that is not consistent with standard trade-off theory or signaling theory. The empirical results provide strong support for our model.