Pyramid IPOs on the Chinese Growth Enterprise Market

Martin Holmén, Peng Wang

Research output: Contribution to journalConference articleScientificpeer-review


This paper investigates Initial Public Offerings (IPOs) of high-tech firms on the Chinese Growth Enterprise Market (GEM). Almost half of the high tech IPOs on the GEM are set up in pyramid structures. The likelihood of a pyramid structure increases with the size of the IPO firm and state control. Our results do not suggest that pyramids are set up to overcome financial constraints. However, we document that pyramid IPOs are discounted before the IPO. The price to book ratio estimated at the subscription price is significantly lower for pyramid IPOs compared to stand-alone IPOs. Furthermore, the underpricing is higher for pyramid IPOs. We conclude that IPO investors demand a higher risk-premium when investing in pyramid IPOs which translates into a lower subscription price and higher underpricing.
Original languageEnglish
Peer-reviewed scientific journalEmerging Markets Finance and Trade
Publication statusPublished - 2013
MoE publication typeA4 Article in conference proceedings
EventAsian Finance Association Annual Meeting - Nanchang, Jiangxi, China
Duration: 15.07.201317.07.2013


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