The Empirical Study On Long-term Performance Of IPOs Of Chinese A Share Market

Long-term performance of IPO shares is a pretty important object of the three hotpots in the research of the initial public offering fields. On this research subject, foreign scholars generally come to an agreement that there is a long-term underperformance of IPO shares all over the world, however our Chinese scholars still have divergent opinions on this research subject. On if there is a long-term underperformance of the IPO shares in our capital market, some scholars consider there is a long-run underperformance, others consider not. On when it starts, when it ends and the extent of the underperformance, they still have different viewpoints of varying degrees. From this point of view, it is significant to explore the subject of long-run performance of IPOs theoretically. What’s more, there is irreplaceable practical significance to further explore this subject for the protection of the benefits and interests of the investors, the ensuring of the effectiveness of the resources allocation function of the capital market, and the provision of funding for the long-run development of the IPO enterprises.This paper empirically examines the long-run performance in three years after the Initial Public Offerings going public, which is based on a sample of227IPO A shares which go public in shanghai stock exchange between2002Jan1st and2008.Dec31st.And different form other scholars’ handing method, this paper computes the stocks’ returns according to the price at the close everyday to prevent the accuracy of the conclusion from the influence of some single abnormal fluctuation.This paper adopts the event study to research the IPO shares long-term performance.First, it computes the long-term Cumulative Abnormal Return of the sample to decide if there is a long-term underperformance of IPO shares in our capital market. Then, it analyzes the factors that influence the long-run performance of IPO shares for the purpose of finding the reasons of the long-run underperformance.There are four parts in this paper which includes six chapters. The structure of this paper would be listed as follow:Chapter one, the introduction,which will introduce the research backgrounds of the IPO shares long-term performance,give some reasons why we should give efforts on this subject,explain the structure,clue and the research method of this article and put forward the innovation and shortcomings of this paper.Chapter two will introduce some main and outstanding research conclusions on the IPO shares long-run performance in domestic and abroad.In addition, this chapter will give some pertinent comments on the conclusions.Chapter three will give a brief introduction to the theoretical systems on the long-term performance of IPOs comprehensively and pertinently. This chapter will give a review of IPO shares long-term performance theory respectively from the angle of the support and the doubt of EMH theory. This chapter is the theoretical basis of this whole article.Chapter four is the determination and measurement of the long-run underperformance of IPO shares. This chapter adopts the CAR model to measure the IPO shares’ long-term cumulative abnormal returns and to decide if there is a long-term underperformance of IPO shares in our capital market. The conclusion is there is a long-run underperformance which is-15.82%,-23.23%and-25.99%in a year, two years and three years respectively after going public. On this basis, we think it is not advisable for investors to invest IPO shares from the first trading day at the close price.Chapter five is the analysis of the factors that influence the long-run performance of IPO shares.First it selects8main explaining variables which include "initial returns","probability of being the lucky number","the turnover rate of the first trading day ","the offering capital of IPO shares ","the total asset of the enterprise","the quantity of IPO enterprises during the month the sample going public","the average initial returns of all the IPO shares which going public in the same month as the sample stock " and "the net profit growth rate". Also, it introduces3controlling variables which includes "the liquidity rate,"the age of the enterprise" and "the interval between the releasing day and the listing day" into the model. The conclusion of the analysis is that:there are six main variables which influences the long-run performance of IPO share obviously and two main variables which don’t;also,there are none among the three controlling variables which finally is able to be as an obvious factor influencing the long-performance of IPO shares.Chapter six will put up with some rationalized proposals to protect the interests of the investors, ensure the effectiveness of the resources allocation function of the capital market and provide funding for the IPO enterprises. First, it advises we should standardize the behaviors of the mainstays of the market;Second,it suggests we should spare no effort to ensure the management layer perform it’s duty.Main innovation in this study are:(1) This study selects227sample A stock companies and analyzes their financial data, trading data and offering materials between2002Jan1st and2008Dec31st and so on to discuss if there is a long-term underperformance of IPO shares and figure out the factors which influences the IPO shares long-term performance. The time quantum is different from other scholars and is after the implement of the securities acts so as to enhance the comparability between the conclusion of this study and other scholars’.(2)Different from other scholars’handing method, this paper computes the stocks’ returns according to the price at the close everyday to prevent the accuracy of the conclusion from the influence of some single abnormal fluctuation.At the meantime, as a result of the author’s own research capacity and constraints of research time, this study has shortcomings and should be improved:(1) a measure of the long-term underperformance of IPO shares can be from a variety perspectives and can adopt kinds of classic models. However this paper only adopts CAR model to measure the long-term underperformance.(2)There are just11explaining variables which are introduced into the regression equation.(3)The time quantum is not long enough.This paper find out that the IPO shares long-term underperformance will continue three years at least after going public but it is not able to figure out when it will ends.