| The long-run underperformance of IPOs, one of the three "New Issues Puzzles" has been the hotspot issue focused by western academe in recent years. Based on the in-country and overseas study results in this field and using the benchmark indices such as CAR BR WR and etc, this paper gives an empirical study on the long-run performance of IPOs in China. Our sample consists of 118 A-share IPOs that were listed on China's new stock markets within January 2000 to December 2000. From the results we find that as far as the sample is concerned, the AIR is 151.94% , the CAR is -12.63% and is statistically significant, which shows that IPOs in China outperforms in the short run and underperforms in the long run.In order to investigate possible explanations for the underperformance of IPOs in the long run, we use cross-sectional and time series patterns analyze the relation between the long-run performance of IPOs and the 10 factors such as the market adjusted initial returns the market value of IPOs industry and ect. The results show that the long-run performance of IPOs has much to do with the factors such as adjusted initial returns industry the book-to-market ratio the rationing rate - earnings before offering- predicted earnings- and the percentage of shares retained by state and legal entities and etc, while has little to do with the factors such as the market value of IPOs- the reputation of the intermediaries and time window and etc. Furthermore, through regression models ,we can see among all the factors, only the rationing rate earnings before offering- predicted earning and industry 4 factors is statistically significant, which shows that these 4 factors has a significant effect on the long-run performance of IPOs.Comparing our study results with the explanations that western scholars provided before, we find that the factors that influence IPOs' long-run underperformance are mainly related to the investors' over-optimism and over-reaction to the prospect ofIPOs. And this over-reaction is not a behavior in short term. For our sample, the over-reaction lasts about 2 years, and then with investors' becoming rational, the price of the new stock will regress to its intrinsic value. Therefore, developing a rational idea and tactic about investment and building a rational atmosphere for investment will not only help the stock market develop persistently and healthily, but also help protect the profit of the medium and small investors. Moreover, strengthening the supervisal of the information in the IPO market is also an important way to guarantee the quality of the listed company and to keep away the risk of secondary market.Finally, comparing our empirical study results with the definition of the efficient capital market proposed by Ross, we find that the price behavior of the new issues is not consistent with Ross's definition, i.e. the stock price can not reflect all the information sufficiently and immediately. So we can draw a conclusion that the stock market in China is not a semi-strong efficient market.
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