Underpricing In Seasoned Equity Offerings: Evidence From Chinese Stock Market

Seasoned Equity offerings of Chinese listed firms were underpriced by an average of 11.59 percent during last four years, from 1999 to 2002, with the discount decreasing substantially over time, which is opposite to the increasing tendency in American listed firms. Consistent with uncertainly and asymmetric information theory, underpricing rate is positively related to the stock price volatility and the P/E ratio when issuing the seasoned equity offers. However, there is no significant relation between the total market value of firms and their underpricing rate in seasoned equity offers. Inconsistent with demand-supply equilibrium theory, the regression result shows that underpricing rate is insignificantly related to the relative issue size. In addition, the shareholding structure of listed firms has no significant relation to underpricing rate, underpricing rate is negatively related to the issuing price...