Accounting conservatism and IPO underpricing: China evidence

Zhijun LIN*, Zhimin Tian

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

25 Citations (Scopus)

Abstract

This study examines how accounting conservatism impacts underpricing of initial public offerings (IPOs) in the Chinese stock market. In addition, we investigate how information asymmetry affects the association of accounting conservatism with IPO underpricing. Based on regression analysis of 674 A-shares companies that went public through IPOs at both Shanghai and Shenzhen Stock Exchanges in China during 2001-2009, we find that (1) accounting conservatism is negatively associated with the magnitude of IPO underpricing; and (2) the relationship between accounting conservatism and IPO underpricing is more pronounced when information asymmetry is high. The findings should shed a light on what drives IPO underpricing and how it could be affected by accounting conservatism in an emerging economy.

Original languageEnglish
Pages (from-to)127-144
Number of pages18
JournalJournal of International Accounting, Auditing and Taxation
Volume21
Issue number2
DOIs
Publication statusPublished - 2012

Scopus Subject Areas

  • Accounting
  • Finance

User-Defined Keywords

  • Accounting conservatism
  • Chinese accounting
  • Information asymmetry
  • IPO in China
  • IPO underpricing

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