What Explains the High Returns to the IPOs of China's A-Shares?

This paper investigates the initial returns of Chinese A-share initial public offerings (IPOs) under the split-share structure before 2005. The split-share structure refers to the coexistence of shareholders of tradable shares and shareholders of non-tradable shares. The average initial return is much higher than those of other countries, even though this has been declining. We argue that the split-share structure causes the initial returns of Chinese IPOs to be very high level in the beginning, and then to decrease slowly because of the institutional transition and the path-dependent characteristics. With the reform of non-tradable share offerings, the average initial return of Chinese IPOs is likely to fall.