Cross‐sectional determinants of post‐IPO stock performance: evidence from China |
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| Authors: | Xin Chang Shi Hua Lin Lewis H. K. Tam George Wong |
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| Affiliation: | 1. Division of Banking & Finance, Nanyang Business School, Nanyang Technological University, Singapore;2. Faculty of Business Administration, University of Macau, Macau, China;3. School of Accounting and Finance, The Hong Kong Polytechnic University, Kowloon, Hong Kong |
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| Abstract: | 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. |
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