Analyzing Motivation and Timing of Chinese Companies for Overseas IPOs

Abstract

This study uses the domestic and overseas IPO data of China from 1993 to 2017 to conduct empirical analyses, proving a positive correlation between the A-shares IPO market popularity and the number of overseas IPOs. Through research, we find that when the number of A-share IPOs listed and the financing amount rises, the willingness of Chinese companies to choose overseas IPOs is enhanced. This is because when the investment sentiment in the A-shares market is overheated, the government implicitly intervenes in the issuance of domestic IPOs to adjust the market heat. However, when the domestic IPO market is gaining popularity, the demand for IPO financing of Chinese companies also rises, while the government does not adjust the IPO issuance rate according to financing demands. As a result, the financing problems faced by Chinese companies are not solved in a timely manner. Therefore, many companies seek to solve this problem by listing in overseas capital markets. On the other hand, when the A-share IPO market is too hot, the degree of market pricing deviation will also rise. Many high-quality companies are unwilling to list in China because of the high IPO underpricing rate, and instead they choose to list overseas.