Can corporate governance variables explain short-term IPO returns? A study of the Chinese Market

The IPO (initial public offer) literature has had little to say on whether what is regarded as good corporate governance has an impact on the level of underpricing. China has entered a period in which corporate governance standards are being given a priority in the reform of the enterprise structure of the economy. I examine a dataset of IPOs in the Shanghai and Shenzhen stock markets to determine any relationships between a set of corporate governance variables and underpricing. The results indicate that variables that have previously been identified as having explanatory power remain as explanations of underpricing. In contrast, I find that corporate governance variables have yet to have any explanatory power in the underpricing regressions except board composition.