Influencing factors of short- and long-term returns on IPOs in the Chinese and the U.S. capital markets: A systematic literature review

Abstract

In their studies, Loughran, Ritter, and Rydqvist (1994), Fan, Wong, and Zhang (2007), Chi and Padgett (2005) as well as Ritter (1991) show differences in the regional characteristics of underpricing and overpricing in initial public offerings (IPOs). Our study analysis the regional differences in the influencing factors of underpricing or overpricing based on a systematic literature review that is focused on the Chinese and the U.S. capital markets. Therefore, following the systematic literature review protocol, it was possible to select 38 papers published between 1988 and 2019. Our results show that stock market-specific factors are crucial for regional differentiation. Results on the correlation between stakeholder- and issuance-specific factors are at least partially contradictory. The uniformly identified correlations of stakeholder and issuance factors diverge only slightly in both markets. The investigation of the influencing factors mentioned in the studies also reveals the causal relationship that the IPO return phenomenon of underpricing is influenced by site-exclusive and site-independent factors, whereas overpricing is primarily influenced by site-independent factors. We thus close an existing research gap and satisfy an important information need of issuers and investors.