Abstract
In this article, we investigate initial public offerings (IPOs) of high-tech firms on the Chinese Growth Enterprise Market (GEM). Almost half of the GEM IPOs 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 subscription price-to-book ratio is significantly lower for pyramid IPOs, and this translates into higher underpricing. We conclude that IPO investors demand a higher risk premium when investing in pyramid IPOs.
| Original language | English |
|---|---|
| Peer-reviewed scientific journal | Emerging Markets Finance and Trade |
| Volume | 51 |
| Issue number | 1 |
| Pages (from-to) | 160-173 |
| Number of pages | 14 |
| ISSN | 1540-496X |
| DOIs | |
| Publication status | Published - 2015 |
| MoE publication type | A1 Journal article - refereed |
Keywords
- 512 Business and Management
- growth enterprise market
- initial public offering
- oversubscription
- pyramid ownership structure
- underpricing