Dichotomy of Chinese Domestic and Overseas IPOs
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Authors
Wu, Congsheng
Issue Date
2012
Type
Presentation
Language
Keywords
Faculty research day
Alternative Title
Abstract
Description
Due to regulatory constraints, many Chinese companies pursue overseas listings in HongKong and U.S. without being first listed in the domestic market. Some of them have, often after many years, eventually returned to the mainland by offering A-shares to domestic investors. This unique feature of cross-listed Chinese stocks provides a natural experiment field to test conventional IPO theories, which suggest less underpricing in homebound IPOs.Using a sample of Chinese IPOs made from 1990 to 2007, we find that substantial underpricing still prevails in homecoming IPOs by those already listed abroad, with an average first-day return of 96.38%. After control for firm size and potential selfselection bias, these IPOs do not differ on the first day of trading than purely domestic offerings. The hot short-run performance in their A-share debuts is in sharp contrast to what they experienced in their overseas listings: The mean first-day return is merely 5.75% for their ADRs and 11.55% for their Hong Kong IPOs.
Citation
Poster 18