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Motivation and Reasoning Behind Chinese Enterprises Overseas Listing
By Sjing Liang and Xiao Chen
Starting from the early 90s, the number of Chinese firms going public overseas has been increasing rapidly. By running a probit regression, this paper investigates the different factors that affect a Chinese firm’s choice of listing location, either a domestic or a foreign stock exchange. Our data consists of 286 foreign listed companies and 788 domestically listed ones that went public between 2005 and the first quarter of 2011. Our results reveal that, larger firms, in terms of their pre-IPO revenue values, are more likely to go public overseas. In addition, firms in high-tech and capital-intensive industries, namely technology, financials, and real estate, are better represented in overseas markets. We also find that stock markets with lower underpricing levels are more attractive to Chinese firms, who tend to avoid capital markets with high underpricing levels as they do not want to be undervalued at their IPOs.
Advisor: Alon Brav, Edward Tower, Kent Kimbrough | JEL Codes: G10, G15 | Tagged: Chinese Enterprises, Initial Public Offerings, Oversea Listing, Stock Markets
Taming the Dragon: The Modernization of the Chinese Equity Markets and its Effects on IPO Underpricing
By William Benesh
The extreme underpricing of Chinese Initial Public Offerings in the early days of the Chinese equity markets was reduced by several reforms instituted by the Chinese government from around 2000 to 2002. These reforms reduced 1-day returns on IPOs from 295% to 72%. The reforms reduced IPO underpricing by decreasing the inequality between IPO supply and demand. These reforms, while announced between 2000 and 2002, likely took until around 2004 to take full effect. In addition to inequality between supply and demand, other factors such as information asymmetry and government/quality signaling contributed to underpricing both before and after the reforms.
Advisors: Francesco Bianchi, Kent Kimbrough | JEL Codes: G14, G15, G28, G30 | Tagged: China, Initial Public Offerings, Regulation, Stock Markets, Underpricing
