Agricultural Bank of China (ABC) is the second company in the history of the Shanghai stock exchange to embrace the "green shoe" option - known in legal jargon as an over-allotment option - which allows members of its initial public offering (IPO) underwriting syndicate to sell additional shares if demand exceeds the original offering.

The green shoe can offer up to 15 percent more shares than the original number set by the issuer as a way for underwriters to stabilize the price of a new issue after its trading debut.

The name is derived from the Green Shoe Manufacturing Co, a boot maker founded in 1919 in the United States, the first company to permit underwriters to use this practice in its offering.

In the ABC A-share offering, lead underwriters are entitled to exercise the green shoe option within 30 days following its listing.

When used, the option aims to maintain the share price in the initial listing period and engineer a smooth transition to the secondary market.

The exercise is also expected to greatly lower investor risks for retail investors who subscribe to its online IPO tranche.

Industrial and Commercial Bank of China (ICBC), the world's biggest lender by market value, was the first Chinese company to use the green shoe practice in the A-share market in 2006 during what was then the world's biggest IPO.

ICBC priced its A-share IPO at 3.12 yuan and closed at 3.28 yuan on its first day of trading in Shanghai on October 27, 2006.

Its share prices later declined to as low as 3.25 yuan before rebounding to close the year at 6.36 yuan, or up 103.8 percent from its IPO price.