Research On The Decline Of Performance And Affecting Factors Of China’s GEM After IPO

IPO effect refers to the performance of listed companies after the initial public offering (the IPO) significant decline, this phenomenon has been confirmed in both foreign capital market and China’s main market. Previous studies abroad showed that in foreign capital markets and China’s main market, small and medium-sized market, there are different degrees of IPO effects. Since China opened GEM, if there is IPO effect in GEM leaves to be further tested.GEM is a supplement to the main board market. The GEM does well in China’s development of providing more convenient financing channels for SMEs, and also of the industrial structure adjustment, promoting an important means of financial reform and economic reform. Since October 30,2009, China’s GEM is facing many problems; its operating performance is not satisfactory. Some companies’ low profitability and growth deficiency, does not meet the original GEM functional orientation, which has caused concern in the society.Currently, research on China’s GEM IPO focused on underpricing and ultra-raise. Domestic scholars’study in performance of listed companies after IPO mostly concentrated in the main board market and small and medium-sized market. Research in performance of GEM listed companies after IPO is relatively much less.This article selected ROE and to represent the performance of GEM listed companies, ROE represents the company’s profitability and Net Profit Grow Rate indicates the company’s ability to grow net profit. Selected sample of 281 companies, and analyzed companies’ performance in IPO year and 2 years after IPO, to examine the presence of IPO effect in the GEM. Then, analyzed factors of IPO Effect on GEM, considering the characteristics of China’s GEM itself and China’s special economic environment. This study found that the GEM sample’s ROE and Net Profit Growth Rate have both been a general decline after IPO, regardless of the industry. Also found that, performance of the first year after IPO has a larger decline than that of the second year after IPO. Later, established a cross-sectional regression model including corporate governance variable and found out:the degree of concentration and Management Ownership can effectively explain GEM IPO effect to some extent. Finally, based on the analysis of empirical results, put forward some improvement and development proposals of Chinese GEM from the perspective of regulatory control and corporate governance.