A comparison of initial public offering (IPO) underpricing between China A-shares and B-shares markets

Abstract

This paper investigates the underpricing level of A-shares and B-shares IPO companies listed in the Chinese stock market from 1991 to 2010. The sample covers 84 IPOs of listed companies with 42 A-shares and 42 B-shares. Our results confirm that Chinese IPO underpricing is the highest among the major world markets. We further examined some of the factors that influence IPO underpricing such as: offering price, issuing size, age of the firm before going public, turnover rate in first trading day and industry type. The results confirm that the offering price and the turnover rate have strong influence on IPO underpricing of A-shares. None of these factors has any significant effect on B-shares.