Market-based Financing Reforms and Shareholder Valuations: Event Study Evidence from the Chinese Science and Technology Innovation Board

Abstract

This paper studies the impact of the newly introduced science and technology innovation board (STIB) on stock valuations in China. This Nasdaq-style board features a market-based IPO system that contrasts with the current approved-based arrangement. Event study approach shows that A-share firms pertaining to STIB related industries increased significantly after the reform announcement. The effect is stronger for Non-SOEs and firms with higher R&D capacity. Public shareholders of the firms filing STIB IPO applications experienced salient growth in their abnormal returns while their industry competitors suffered price drops. Financial analysts also broadened their company coverages in STIB related industries and revised their market valuation forecasts positively in line with the market investors.

Analysis of the Fifth Set of listing standards of China Science and Technology Innovation Board

“…So, the IPO is not suitable for China's huge crowd market. But STAR suggests that China's new technologies could work together with future financial reforms to boost the country's economic growth [6]. Huidon science and technology innovation board listing application text will affect the company's success of listing.The author was found in the author's confirmation that the length of disclosure, fog index and redundancy in the registration statement, inquiry letter and response letter play an important role in the company's listing documents [7].…”

“…Despite a series of regulations, the Science and Technology Innovation Board provides more platforms for many companies. The board has relaxed listing standards for tech companies to provide more opportunities for Chinese tech companies [6]. The transformation of the institutional goal of the listing of the Science and Technology Innovation board has changed from the previous government to strictly control the listing of companies to relax the policy, allowing investors to judge and make decisions on the stock trading of listed companies.…”