Underpricing and long-term performance of IPOs in China

We study the underpricing and long-term performance of A- and B-share initial public offerings (IPOs) issued in China during the 1993-1998 period. The average underpricing for A- and B share IPOs are 178% and 11.6%, respectively. The underpricing of A-share IPOs is positively related to the number of days between the offering and the listing and the number of stock investors in the province from which the IPO comes, and negatively related to the number of shares being issued. None of these characteristics explain the underpricing of B-share IPOs. In the long run, A-share IPOs slightly underperfonn the size- and/or book/market (B/M)-matched portfolios while B-shares outperform the benchmark portfolios. (C) 2003 Elsevier B.V. All rights reserved.