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Since its inauguration, ChiNext has gone through three time periods with twodifferent regulation regimes and three different sets of listing day tradingrestrictions. This paper studies the impact of regulation regimes and listingday trading restrictions on the initial return of ChiNext IPOs. We hypothesizethat the initial return of a ChiNext IPO contains the issuers intrinsic valueand the investors overreaction. The intrinsic value is represented by the IPOs21st day return (monthly return), and the difference between the monthly andinitial returns (intramonth return) is a proxy of the overreaction. We findthat all significant variables for all three returns in all three time periodsfall into four categories: pre-listing demand, post-listing demand, marketcondition and pre-listing issuer value. We observe stark contrasts amongvariable categories for each of the returns in the three time periods, whichreveals an evolution of the investors behavior with regard to the progressionof regulation regimes. Based on our findings, we argue that the differencesamong the levels and determinants of initial return, monthly return (intrinsicvalue) and intramonth return (overreaction) in different time periods can belargely explained by regulation regime changes along two dimensions: 1)approval vs. registration and 2) listing day trading curbs and return limits.We find that IPO pricing is demand-driven under the approval regime, butvalue-driven under the registration regime. We further compare the impact ofregulation regime changes on ChiNext IPO pricing practice, and propose a futureresearch plan on ChiNext IPO pricing efficiency with policy implication.

The Impact of Regulation Regime Changes on ChiNext IPOs: Effects of 2013 and 2020 Reforms on Pricing and Overreaction