Conflicts of interest and china's A-Share underpricing

Zhou, Yuwei and Gannon, Gerard 2005, Conflicts of interest and china's A-Share underpricing, in AsianFA 2005 : 16th Asian Finance Association Conference, Universiti Putra, Kuala Lumper, Malaysia, pp. 1-44.

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Title Conflicts of interest and china's A-Share underpricing
Author(s) Zhou, Yuwei
Gannon, Gerard
Conference name Asian Financial Association. Conference (16th : 2005 : Kuala Lumpur, Malaysia)
Conference location Kuala Lumpur, Malaysia
Conference dates 11-13 July 2005
Title of proceedings AsianFA 2005 : 16th Asian Finance Association Conference
Editor(s) [Unknown]
Publication date 2005
Conference series Asian Financial Association Conference
Start page 1
End page 44
Publisher Universiti Putra
Place of publication Kuala Lumper, Malaysia
Keyword(s) Chinese IPO
Summary The extremely high A- share underpricing in China's primary market provides us with a very interesting area of empirical research. Previous studies on China's IPO underpricing have been suggestive, but in-conclusive. We investigate the A- share underpricing by employing the most recent data available. A significant decline in A- share underpricing is found in 2003 relative to previous years (and much less than that recorded in the literature to date). We examine the validity of previous A- share underpricing models, reported in the literature, and find a statistically significant structural break in the data during 2003 when these models are specified. We further explore conflicts of interest in the Chinese IPO market and specify an alternative class of models to further examine this change in observed market behaviour. Our results suggest that a contract with high underwriter's fee leads to less A- share underpricing. Our results also suggest that the asymmetric information hypothesis does not apply in the Chinese !PO market in 2003. Overpricing by the secondary market and the trading activity on the first trading day are the main functions of the A- share underpricing. This study has important implications such as guiding the Chinese government policy regarding the regulations of Initial Public Offering.
Language eng
Field of Research 150201 Finance
HERDC Research category E1 Full written paper - refereed
ERA Research output type E Conference publication
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Document type: Conference Paper
Collection: School of Accounting, Economics and Finance
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