Empirical Research On Long-run Underperformance Phenomenon In Chinese GEM

To examine the long-run performance of IPOs and its influence factors,this paperselects280Chinese initial public offerings listed in the GEM(Growth EnterpriseMarket) over the period2009-2011as samples.Through the empirical analysis,thisstudy has found there also exists “long-run underperformance” phenomenon in theGEM of china. It concludes that whether containing initial underpricing or not,aftermarket performance is always underperformance.Because of having many factors influencing the market performance of IPOs,this paper takes the characteristic of China’s securities marke into account,and selects the corresponding proxy variable of signal hypothesis, ex anteuncertainty hypothesis, earnings management hypothesis, investors sentimenthypothesis and IPO effect hypothesis as influence factors of the IPO marketperformance.Through an analysis of influence factors,it can test whether thesehypothesises can explain chinese underperformance phenomenon.Firstly this paper has the influence factors and corresponding revenue indicatorsgrouped,then carries on independent sample test, finally gets the regression analysis,it has found that initial underpricing has significantly negative correlation withlong-term performance which violates the signal hypothesis,at the same time,earnings per share(EPS) has no significant effect on long-term performance,whichshows that EPS does not play its quality signal function; Intersection of initialunderpricing and discretionary current accrual has significantly negative correlationwith long-run performance,and their intersection coefficient is bigger, which showsthat investors are too optimistic about corporation’s future earnings,however, issuersoften manage their earnings before issuing.when the financial performance is worsethan expected, investors’ enthusiasm fades, then stock return declines. Both issuingscale and direct holding shareholders holding proportion that are agent variables of exante uncertainty hypothesis have significantly positive correlation with long-termperformance,this suggests investors can reduce the uncertainty of advance byanalysising the two index. Compared to the previous year before listing, the rate ofreturn on total assets, total assets of the cash recovery rate, the growth rate of mainbusiness as well as asset turnover has decreased significantly, and the growth rate ofmain business has significantly positive effect on long-term performance. Investor sentiment has no significant impact on one-year yield,but it has significant impact ontwo-year yield.It does not show the tendence that the higher investor sentiment is, thelower the rate of yield is.Finally, according to the results of the study it puts forward some correspondingpolicies and suggestions: First perfecting issue pricing system and Introducing themarket pricing mechanism; Second improving securities market informationdisclosure mechanism;Third improving the overall quality of firms; Fourth furtheclarifying relevant responsibilities of intermediary agencies in securities issueand strengthening the punishment of the illegal behaviors;Fifth accelerating thedevelopment of institutional investors.