A Comparative Analysis Of IPOs Long-term Performance Between A-share And H-share

The IPO related issues have received lots of attention recently. Among theseissues, IPO underpricingphenomenon,“hot issue” market phenomenon and long-termunderperformance phenomenonare called “IPO puzzles”. Most of researchers haveinvestigated intensively on IPO underpricing and “hot issue”market while ignored theIPO long-term underperformance. Many domestic researchers focus on A-sharemarket but pay little attention on IPO on H-share market. In this study, I compare theIPO long-term performance of stocks on A-share market and H share market, anddocument their difference. My sample includes773listed firms on A-share marketand104listed firms on H-share market from2000to2009,21firms listed on bothmarkets. First of all, I present descriptive statistics of IPO underpricing and long-termperformance on two markets by sorting all firms into different IPO year, markets,industries and offering prices. Secondly, I test whether the difference of long-termperformances between two markets is statistically significant. Thirdly, I usemultivariable regression model to find out factors that may have effects on long-termperformance.Built on previous theoretical and empirical studies, I find the three-yearCumulativeBenchmark-adjusted Return (CAR) of stocks on A-share market after IPOis-31.25%, the evidence of long-term underperformance. On the other hand, stockslisted on H-share market show evidence of long-term outperformance, and thethree-year CAR after IPO is27.53%. The difference between two markets isstatistically significant. I also document evidence of the three-year outperformance ofthe21cross-listed firms in both markets. Their after IPO three-year CAR is6.81%onA-share market and60.68%on H-share market, much stronger than that of their peersin each market. I find substantial variance by sorting firms into different IPO year,markets, industries and offering prices. On A-share market, the three-year after IPOlong-term performance can be significantly affected by market performance, theamount of raised fund and whether the stock is listed on primary or growth enterprisemarket. On H-share market, the three-year after IPO performance can be significantlyaffected by market performance. IPO underpricing doesn’t show any effect onlong-term performance on both markets.