Empirical Research Of The Long-run Performance Of The Initial Public Offerings In A-Share Market Of Shanghai In China

IPO, which is the abbreviation of the initial public offerings, refers to the behavior of the enterprise for the first time to issue the shares to the public investors, the purpose of which is to raise funds and become a listed company. After the IPO, the company becomes a Public firm, also called as listed firm. The long-run performance of IPO shares is one of the three major hot topics in the field. For investors, the ultimate goal of investment is to get healthy and real returns. For a healthy and developed market, the stability of the expected return and long-term investment value of listed companies are closely related. So could our current primary and secondary Markets provide investors with such kind of return? As an access to connect the primary and secondary markets, the initial public offering plays an important role in the corporate finance. Therefore, the study on IPO price behavior after the stock market is vital for exploring the market operation rules and the efficiency. And the study of the IPO long-run performance in Shanghai A-share market is meaningful to improve efficiency of our security market and to perfect the function of the emerging stock markets.This paper empirically examines the market performance in the three years after IPO listing, based on a sample of 852 which listed on the Shanghai A-share stock market from June,1992 to August,2007, and cut-off date for August 31, 2010. From 1992 to 2010, China's stock market comes through ups and downs, which makes this study more timely and representative. First it calculates the long-run post-IPO abnormal returns, using three methods and selecting three reference standards. The methods include event time method (CAR and BHAR) and calendar time method (CAPM), the measurement results of each method can confirm each other, and then the calculated results can be more accuracy. The results of the calculation manifest that the performance of the IPO stock is better than the market's average returns, in other words the returns of the initial public offerings is more than the old stocks. Research analyzes influencing factors including the rate of the IPO under-pricing, the distribution system, the size of the listed firms and the quality of the listed firms. The study found:the IPO stock portfolio of the lower under-pricing level performs better than the higher one; the smaller the size of the listed firms, the better the performance of the long-run; growth enterprise performs better than the value-enterprise on IPO. In the end of the essay, we sum up the results of the research and give some advises for how to improve the efficiency of the IPO market and how to make decision on the investment in IPO stocks for the usual investors.