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Do IPOs Affect Market Price? Evidence from China

Published online by Cambridge University Press:  13 June 2018

Abstract

We examine whether sizable initial public offerings (IPOs) affect the whole market. Using a Chinese IPO sample, we find robust evidence that sizable IPOs depress the market price on not only the listing day but also the offering (subscription) day. The impact on the market is negatively correlated with IPO size on the listing day. However, this impact is largely transitory. The China Securities Regulatory Commission (CSRC) often places a moratorium on IPOs to support the market, which seems ineffective as the negative IPO effect is transitory and moratoriums are not perceived as good news.

Type
Research Article
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2018 

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Footnotes

1

We thank Paul Malatesta (the editor) and Jay Ritter (associate editor and referee), whose insightful comments and suggestions substantially improved the paper. We also thank Warren Bailey, Re-jin Guo, Ying Jiang, Borja Larrain, Zhe Shen, Grace Tian, Wilson Tong, Yexiao Xu, Chu Zhang, Qi Zhu, and seminar participants at Fudan University, Zhejiang University, Dongbei University of Finance and Economics, Central University of Finance and Economics, Dalian Polytechnic University, Shantou University, Chongqing University, Ningbo Nottingham University, Central China Science and Technology University, Lanzhou University, Renmin University, Shandong University, Shandong University of Finance and Economics, Tianjin University, Soochow University, Southern University of Science and Technology, Zhongshan University, and Zhongnan University of Law and Economics for their helpful comments and suggestions. All errors remain ours. We gratefully acknowledge the financial support from the National Natural Science Foundation of China (NSFC Project Nos. 71172035, 71572046, and 71572047).

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