The IPO Underpricing and Market Liquidity after Reform on Chi-Next Board

This essay examines market liquidity and underpricing of initial public offerings (IPOs) in the wake of the Chi- Next board's financial reform in June 2020. The results show that IPO underpricing has grown and market liquidity has improved since the reform. The channel by which the reform affects IPO underpricing and market liquidity can be explained by investor sentiment. The impact of the reform on underpricing and market liquidity can also be explained by other firm-level characteristics, such as leverage and firm life cycle.