An Empirical Assessment of A-Share IPO Under-Pricing in China

Abstract

This paper investigates the under-pricing and long-run performance of 230 A-share IPOs issued in the Chinese markets using comparable firm multiples. We find that A-share IPOs are severely under-valued by issuers and underwriters at the offer, but over-valued by investors on the listing

day. Both contribute to the severe under-pricing of IPOs in China. Our findings

are robust across stock exchanges, classification of firms, criteria for

choosing matching firms; absence of CSRC regulation and B-share market prices, respectively. The results also show that those over-valued IPOs by investors on the listing day under-perform those under-valued IPOs in the long-run.