“Noon Sunshine-Young Scholars Seminar” is a regular academic exchange platform held by School of Finance. It aims to offer valuable occasions of communications among scholars in our college, between teachers and students, the domestic and the oversea. In this semester, we keep our original intention, set off for a new voyage. We will devote ourselves to fostering the academic atmosphere in the college, and promoting the academic level for both teachers and students.

The third session of “Noon Sunshine-Young Scholars Seminar” for the Autumn Semester in 2024 is arranged as follows:

Keynote Speaker: Lu Zhou

Date

Thursday, October 24th, 2024

Time

12:00-13:30

Lecture Venue

Room 116, School of Finance

Abstract

China's stock market pricing has always been an interesting research direction for scholars around the world. From the perspective of private equity and venture capital, this article explores why the share prices of most IPO companies plummet after they go public. We find that the main problem is that the PE/VC market in China is immature, and the participants in the primary and secondary markets are not the same, which leads to conflicting goals among market participants. Institutional investors typically invest in companies when they are more mature in the pre-IPO period and then reap the benefits from retail investors after listing. To meet the investment needs of institutional investors, pre-listing companies often window dress their operating conditions through earnings management and collude with book builders to raise the company's stock price in the pre-IPO period. In the secondary market, institutional investors liquidate their stocks, leaving retail investors to bear the losses. We found that the more financing rounds a company has before listing and the longer the waiting time for an IPO, the more prone it is to financial fraud. At the same time, institutional investors carry out a large number of equity pledge operations to cash out, and this effect is more pronounced in companies with more financing rounds before listing. The Chinese government uses a lock-up period policy to curb this situation. Although the lock-up period can prevent institutional investors from selling shares during the listing period to cash out, there are loopholes in the lock-up period policy. Institutional investors can cash out using equity pledge contracts. We found that companies with more financing rounds before listing are more likely to engage in financial fraud and equity pledges after the government enacts and strengthens the lock-up period policy.