Volatile market condition, institutional constraints, and IPO anomaly: evidence from the Chinese market

We provide a holistic view of factors affecting IPO underpricing and aftermarket trading of Chinese initial public offerings (IPOs) over 23 years. The subscription ratio and offer amount are among the top three most important determinants of underpricing when stock markets are less volatile. However, the recent IPOs’ initial return and institutional constraints on offer price and aftermarket trading price are the driving forces in volatile markets. The underpricing (the first‐day trading price limit) is the most important factor affecting IPO aftermarket trading when stock markets are less (more) volatile, suggesting how factors affect IPO underpricing and aftermarket trading depends on stock market conditions.