A Research On The IPO Effect Of Listed Companies On Chinese GEM Board

Growth Enterprises Market board (GEM) has been running for more than three years since the opening in October,2012, and become as well an important component as Main board and small and medium-sized enterprises board (SMEs board) in Chinese capital market. However, since the opening of GEM, it has raised suspicion on high issue price and high price-earnings ratio. After the disclosure of the first annual report, a number of listed companies experienced a substantial drop in business performance, which gave rise to the doubt among academics and industries on whether Initial Public Offering (IPO) effect existed in GEM board.IPO effect refers to the condition that a company strives to reach the standards for being listed, but suffers from decreased business performance after being listed. Its business performance takes the form of an inverted V-shape, which is demarcated by the year of IPO. Drawing form the capital market around the world, IPO effect exists extensively no matter in mature markets or immature markets like listed companies on Chinese Main board.However, it is still uncertain whether IPO effect exists in Chinese GEM board. This paper sampled153companies in GEM board listed between2009and2010, used four dimensions of corporate performance with thirteen indexes, and examined the issue with median and mean testing. The result showed that there is IPO effect in companies listed on GEM board. Before the IPO, the business performance didn’t grow much; yet after the IPO, the performance slipped somehow.To better indicate the current situation of companies listed on GEM board, two cases, Jinlong Machinery&Electronics Co, Ltd and Guangdong By-health Biotechnology Co., Ltd, were studied. It revealed that there existed companies performing well before the IPO and not so well after that, and also companies seeing a rapid growth after the IPO. This phenomenon might enlighten researchers and investors interested in GEM board.