Abstract: In early 2020, the novel coronavirus disease (known as “COVID-19”) triggered a global public health crisis due to its highly contagious nature. The sudden outbreak of the pandemic triggered a sharp decline and shock in the securities markets, posed challenges to firms’ sustainable operations, affected firms’ external financing decisions, and increased the uncertainty about investors’ expectations for the future. This further expanded the information asymmetry between firms and investors, which was an important factor leading to IPO underpricing.
To contain the spread of the pandemic, the Chinese government implemented normalized control measures by suspending production and business operations, closing stores, and restricting resident activities. China was one of the few countries that adopted a “dynamic zero-case” policy, which lasted up to three years. More importantly, the political system and economic environment within a country, as well as the collective consciousness and customs embedded in the society and culture are basically the same. This unique context provides a distinctive perspective for researching the impact of the COVID-19 pandemic on IPO pricing in the Chinese A-share market.
Our research endeavors to answer the question: does the COVID-19 pandemic significantly influence IPO pricing, and if so, through which channels? During the pandemic, China’s A-share markets implemented registration-based reforms, removing price-earnings ratio caps and first-day trading price limits for Growth Enterprise Market (GEM, also known as ChiNext market) and Sci-Tech Innovation Board (STAR market) listings, thereby avoiding distortions to IPO pricing and investor valuations. Analyzing 409 firms listed on the ChiNext market and 415 firms listed on the STAR market, we investigate how pandemic severity has influenced IPO underpricing through the IPO process (bookbuilding, subscription, and first-day trading). The empirical evidence indicates a significant negative correlation between the severity of the COVID-19 pandemic and IPO underpricing, within the 14 days before the pricing announcement date (listing date). Channel tests show that the COVID-19 pandemic has no significant (a significant negative) impact on the offering prices in the primary market (the first-day closing price of the secondary market). The improvement of pricing efficiency reflects the negative impact on the investors’ firm value evaluations in the secondary market’s pricing. Institutional investors, due to the lock-up restriction, are more negatively affected by the COVID-19 pandemic than individual investors. Moreover, heterogeneity analysis shows that the negative impact of COVID-19 on IPO underpricing is more significant for firms listed on the ChiNext market, low intangible assets, small size, and a high proportion of largest shareholders. Finally, benefiting from the improved post-IPO performance of firms heavily impacted by the pandemic, the negative impact of the COVID-19 pandemic on cumulative abnormal return is limited to the short term.
This study has important implications for market participants and policy makers. First, the information content of institutional investors’ demand in the bookbuilding process highlights their superior valuation capabilities relative to retail investors. Second, the registration-based reform enhances pricing efficiency, with secondary markets promptly reflecting the adverse impact of the pandemic, though primary market pricing remains insensitive to such shocks. Improving the pricing efficiency of the primary market is still the focus of deepening the reform of the registration system.

Key words: COVID-19, IPO underpricing, information asymmetry, evaluations of firm value

摘要： 以注册制下创业板和科创板上市公司为研究对象,首次探讨新冠疫情对IPO定价的影响。结果发现:IPO抑价率与新冠疫情的严重程度显著负相关。作用渠道显示,新股一级市场发行价(二级市场首日收盘价)的高低与新冠疫情程度无关(显著负相关),表明二级市场中投资者对企业的价值认可会受到新冠疫情的负面影响,而机构投资者对企业价值的认可度受新冠疫情的影响较个体投资者更大。异质性分析表明,对于创业板、规模小、第一大股东持股比例高和无形资产占比低的公司,新冠疫情对IPO抑价率的负向作用更显著。另外,新冠疫情对股票收益的负向影响仅在上市后短期内显著。研究结论不仅为股票发行定价提供了经验证据,同时也为市场参与者应对外生事件冲击提供了决策支持。

关键词: 新冠疫情, IPO抑价率, 信息不对称, 企业价值认可度