The Impact of Gain Limits on IPO Underpricing

Abstract

Abstract:

This paper aims to study the impact of stock gain limits on IPO underpricing in China. The empirical test shows that gain limits on the first day of the newly issued stocks would strengthen IPO underpricing. Furthermore, market sentiment has an effect on IPO underpricing. More specifically, high market sentiment could mitigate IPO underpricing when there are not gain limits on the first day. Otherwise, high market sentiment could enhance IPO underpricing and the IPO underpricing rate may be more irrelevant to firms' fundamental information.

Key words: IPO underpricing, gain limits, market sentiment

Zhang Weidong, Su Xin, Chen Hui, Tang Qiming, Yang Xue. The Impact of Gain Limits on IPO Underpricing[J]. , 2018, 30(1): 36-45,135.

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