The Performance of IPOs on Small and Medium Enterprises Board and ChiNext

LIU, XUYANG (2011) The Performance of IPOs on Small and Medium Enterprises Board and ChiNext. [Dissertation (University of Nottingham only)] (Unpublished)

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Abstract

ABSTRACT

This study examines and comparatively analyzes the underpricing and long-term performance of IPOs on the Chinese newly-established ChiNext market and Small and Medium Enterprises Board (SMEB) market, from the beginning of the ChiNext market on 30th Oct 2009 up to 15th Feb 2011, and includes 178 and 244 IPOs on ChiNext and SMEB, respectively. By doing so, a set of hypotheses dealing with the associations between IPOs performance and five categories of independent variables were examined. The five blocks of independent variables are signaling of firm quality, underwriter reputation, ex-ante and ex-post uncertainty surrounding IPO, corporate governance, industry effect and market conditions.

Based on the empirical findings, IPOs on ChiNext and SMEB both have a severe underpricing record compared with other countries in this study, but the level is lower than that reported by earlier Chinese researches, implying some modest improvement in the maturity and sophistication of the Chinese market. IPOs on SMEB are comparatively more underpriced than ChiNext, while ChiNext is more volatile than SMEB. Meanwhile, the ChiNext was excessively speculative in the beginning period, and then have less volatile in the subsequent batches, suggesting this new IPOs market has been becoming mature gradually. The average issuing size of the ChiNext market is smaller than the SMEB, and the average IPO proceeds of ChiNext confirm that it is smaller than the SMEB market. Turning to the ownership structure of IPOs on ChiNext and SMEB, it is interesting to observe that the Chinese government is no longer the largest owner of the IPO firms compared to earlier literatures, which provides the evident that the Chinese government is really implementing her policies of reverting government owned firms into the public management firms. On the other hand, empirical results suggest that IPOs on ChiNext and SMEB both underperformance in the long-term to the overall market. Furthermore, the findings indicate that the ChiNext provides a viable alternative to the SMEB market.

It is found that offer price and firm value which are used as proxy for signaling of firm quality have the most significant impact on the underpricing of IPOs both on ChiNext and SMEB markets. This is followed by volatility, issuing size, turnover ratio and uncertainty surrounding IPO. The underwriter reputation has significant impact on the underpricing only on SMEB, while the state ownership ratio has significant impact only on ChiNext market. Moreover, other corporate governance variables, industry effects and market conditions seem to be irrelevant in explaining underpricing both on ChiNext and SMEB.

In the long-term, it is found that initial return and firm value which are used as proxy for signaling of firm quality have the most significant impact on long-term performance of IPOs both on ChiNext and SMEB. This is followed by profitability (including growth in earnings per share and net profit), volatility, and high-tech industry effect. The gearing ratio and underwriter reputation have significant impact on IPOs long-term performance only on SMEB, while the state ownership ratio and time lag have significant impact on IPOs long-term performance only on ChiNext. Other corporate governance variables and firm age seem to be irrelevant in explaining long-term performance in this study.

Item Type: Dissertation (University of Nottingham only)
Depositing User: EP, Services
Date Deposited: 11 Jun 2021 14:41
Last Modified: 11 Jun 2021 14:45
URI: http://eprints.nottingham.ac.uk/id/eprint/25100

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