A-share Ipos Long-term Performance And Its Influencing Factors In Empirical Research

The long-run underperformance of initial public offerings (IPOs) is one of the three hotspots in the IPO fields. It is necessary to research the long-run performance of IPOs in China, because it benefits how to improve the efficiency of IPO market and provides insight of emerging market. It also adds to the international evidences on IPOs performance. This paper empirically examines the market performance in the three years after IPOs going public, based on a sample of 166 IPOs which goes public in Shanghai Stock Exchange. First it computes the long-run excess returns of the IPOs with various models and the examination of whether the underperformance has statistical significance or not. Then it analyzes the factors that affect the long-run performance of IPOs, in order to find the reason of the underperformance.Research documents that the IPOs significantly underperformed the market or the matching firms by size. The extent of this underperformance is between -32% and -20.88% according the calculating methods, indicating that it is not proper to hold IPOs in China for a long time and the efficiency of IPO market is very low. It also indicates that the cost of external equity capital is lowered for these IPO firms.This study has found that firm characteristics including the rate of circulation, firm age, industry, past operation performance and the decline of earning capacity are the main reason for long-run underperformance. The decline of the earning power should be the basic reason. In addition, offering size, the extent of the market prosperity, investors' over-optimistic emotion in the IPO periods and the reputation of underwriters affect the underperformance, too.In the end, it summarizes the research, and also gives some advices for how to improve the efficiency of IPO market as follow: First improving the quality of firms; second perfecting the system of issuing; third perfecting the information disclosure system of IPO market; fourth ruling and cultivating the financial intermediation; finally boosting the development of organization investors.