The Post-issue Operating Performance Deterioration Of China IPO Firms

This article studys the post-issue operating performance of China's IPO firms based on the sample of the Hushen 300 Index constituent stocks listed in 1994-2003. While the Hushen 300 Index constituent stocks accounts for nearly all of the a-share market in China, the results of empirical study shows that post-issue operating performance of those excellent enterprise deteriorated year by year, IPO effect of those company is obvious.The post-issue operating performance fell sharply in the 3-4 years after IPO. In order to discover the reasons of the post-issue operating performance deterioration of China's IPO firms, this article explore three reasons of post-issuing operating performance deterioration by summing up the results of research scholars both at abroad and home and analysing the situation of China's capital markets and listed firms.They are the cost of agents difference between the state-owned listed companies and private listed companies,IPO financing scale and Sharing of control.The empirical analysis show us that:1.Although based on the agency cost theory state-owned listed companies and private listed companies have big differences in the cost of agents, but their post-issuing operating performance are comparable. The operating performance of private listed companies is not better than state-owned listed companies.2. Empirical testing revealed that post-issuing operating performance deterioration is partly caused by the huge size of the IPO financing.The huge IPO financing scale is caused by low cost of equity financing. The bad consequence of large IPO financing size is inefficient use of IPO funds, a large number of IPO fund is wasted. 3.A high degree of concentration of ownership is a universal characteristic of listed companies in China.Because of the lack of Sharing of control, the largest shareholders are easy to hollow out listed companies, and other bad behavior of the largest shareholders also can not be effectively restricted, which led to post-issuing operating performance deterioration.