IPO policy and IPO underpricing: Evidence from the registration-based IPO reform in China

Based on difference-in-differences method, this document investigates the effects of IPO policies on price efficiency of the Chinese market IPOs. Different from the existing literatures, we document that market-oriented reform even significantly magnifies the initial returns, and no significant effects are detected in longer periods. We argue that registration-based IPO system may amplify the aggressive speculation on the newly listed stocks, which blows up the after-market prices.