We study the underpricing and long-term performance of A- and B-share initial public offerings (IPOs) issued in China during the 1993–1998 period. The average underpricing for A- and B share IPOs are 178% and 11.6%, respectively. The underpricing of A-share IPOs is positively related to the number of days between the offering and the listing and the number of stock investors in the province from which the IPO comes, and negatively related to the number of shares being issued. None of these characteristics explain the underpricing of B-share IPOs. In the long run, A-share IPOs slightly underperform the size- and/or book/market (B/M)-matched portfolios while B-shares outperform the benchmark portfolios.

Unlike previous studies that examine how emerging market return volatility changes subsequent to stock market liberalization, this paper investigates the impact of investibility, or the degree to which a stock can be foreign-owned, on emerging market volatility. We find a positive relation between return volatility and the investibility of individual stocks, even after controlling for country, industry, firm size, and turnover. We also find that a highly investible emerging market portfolio is subject to larger world market exposure than a non-investible portfolio, suggesting that highly investible stocks are more integrated with the world and therefore more vulnerable to world market risk.