There have been various researches done on the performance of the IPO’s of China. It has been shown that during the1990s period IPO was severely underpriced. This was applicable in both A and B type category shares (Mok & Hui, 1998).
The reasons for under pricing of the IPOs were mainly difference in the structure of the ownership of the firm, lag between the listing and offering of the firm and asymmetry in the information available publicly contributed to this under pricing.
It was also revealed that these IPOs were underpriced by the firm in order to give more value to the investors (Su and Fleisher, 1999).
Another research revealed that the mean return of the firm’s assets i.e. return on their assets was at the peak during the year in which the IPO was released. However it declined in the following years after the declaration of the IPO (Aharony, 2000).
The decrease in the mean return on firm’s assets was insignificant statistically for industries which were protected. Examples of such protected industries are petrochemicals, energy and raw materials. These firms belonging to these industries receive special favour from the government of China.