A Study On The Long-term Performance Of Chinese Companies After Initial Public Offerings

IPO refers to an Initial Public offering conducted by a company to sell shares to the general Public.There are three hot issues in the IPO field,namely IPO underpricing,IPO hot issue market and IPO long-term performance.Among them,Stoll and Curly(1970)are the first to study the long-term performance of IPO.Stoll and Curly calculated the short-term and long-term return on investment of nearly 200 small companies,and concluded that the short-term performance of small and medium-sized companies is better than the long-term performance.Although the study about the long-term performance of IPO is not a new research topic,in the new era,China’s primary issuance market is in the process of constant reform and the capital market is also improving,so the study on this issue still has practical significance.On the basis of reviewing and summarizing relevant researches at home and abroad,this paper first adopts the qualitative analysis method to discuss whether IPO’s long-term performance is weak or random from the theoretical level.Based on this qualitative analysis,this paper selected 135 companies listed on Shanghai stock exchange between January 1,2010 and December 31,2014,excluding 4 ST or*ST companies and 2 companies with incomplete data.A total of 129 companies were selected as the sample portfolio.The accumulative excess return model CAR was used to conduct empirical tests on the sample stocks,and it was found that the new stocks in China had long-term weak performance.At the same time,this paper analyzes the factors that affect the IPO long-term performance,be explained variable for three-year cumulative excess return,explanatory variables selected the age,the public issuance company p/e ratio,its debut,securities underwriter reputation and the reputation of the accounting firm,first-day stock rate of turnover,new shares a success rate,rate of heat and the ipos underpricing on the first day,a total of nine factors,analyzes the of variables respectively,defines the calculation method of each variable.Then,stepwise regression(STEPLS)was used to regression the equation,and the following conclusions were drawn:(1)The first-day underpricing rate is negatively correlated with the long-term performance of new shares.The higher the first-day underpricing rate of new shares,the worse the long-term performance of new shares;(2)There is a positive correlation between the reputation of the underwriters and the long-term performance of new shares.The higher the reputation of the underwriters selected by the IPO company,the better its long-term performance will be;(3)There is a negative correlation between the PE ratio on the first day of listing and the long-term performance of new shares.The higher the initial p/e ratio,the worse the long-term performance of new shares;(4)The winning rate of new shares is positively correlated with the long-term performance of new shares.The higher the winning rate of new shares of IPO companies,the better their long-term performance will be.After drawing conclusions,this paper further studied the applicability of various hypotheses on the long-term performance of new shares in China’s capital market based on the above theoretical analysis,and found that the fanatical investor hypothesis and the over-optimistic hypothesis can better explain the weak long-term performance of new shares after IPO in China.At the end of this paper,policy Suggestions are put forward from five aspects,that is,China should further improve and develop the new issue pricing mechanism,develop and establish the underwriter reputation rating system,and formulate various standards for listed companies.