Theoretic And Positive Study On Security Underwriter's Reputation

By answering the question "why security issuing market need underwriter?", and according to transaction cost, information economics, financial intermediary theory and reputation model, this dissertation researched the role of security underwriter in issuance market of security, explained reputation's importance to security underwriter's function of "information producer " and "certifying agency", and studied the significance of reputation mechanism for regulating underwriter's behavior and promoting security issuing market's efficiency. On the basis of the analysis aforementioned, this dissertation also empirically test relationship between underwriter's reputation of China and factors affecting reputation, and tried to find the reason resulting into reputation mechanism's failure in China's issuance market of security.This dissertation argue that significance of underwriter not only lies in allocating and selling securities, but also lies in underwriter's role of "information producer" and "certifying agency ", which greatly alleviate negative influence of asymmetric information, therefore underwriter promote the efficiency of issuance market of security. However, security underwriters face creditability problem as "information producer", i.e. how can investor believe underwriter? Thereby, reputation is indispensability for underwriter in order to solve creditability problem and to win investor's belief. If underwriter loses its reputation, underwriter's function of "information producer" and "certifying agency " will lose foundation. Accordingly, reputation is a key factor, which is related to survival or death of underwriter. Because of such, reputation becomes an important mechanism to control underwriter's behavior, and to influence performance of security issuing market.In view of theory, if the mechanism above-mentioned is in effect, then there are three kinds of relationship in issuance market of security: First, underwriter's rank of reputation is positive with the quality of issuing firm, for the sake of reputation capital's appreciation and future income, the more higher reputation's rank, the more likely which underwriter underwrite security of high quality firm, thereby the relationship is positive between underwriter's rank of reputation and quality of issuing firm, only accord with this relationship, investor can distinguish the quality of issuing firm by rank of underwriter's reputation; Second, underwriter's rank of reputation is negative with IPO's underpricing level, because that IPO's underpricing result from asymmetric information, if underwriter's reputation can well play the role of signal mechanism underwriter, then underwriter with higher reputation rank can more effectively mitigate asymmetry of information between investor and issuing firm. Thereby, when the other factor is constant, the better underwriter's reputation, the lower IPO's underpricing. Third, underwriter's rank of reputation is positive with underwriting service's fee, because the fact the market offers much more underwriting fee to underwriters with higher reputation than to those with lower reputation is an important compensation and encouragement for underwriter to build and maintain their reputation, is also an continuous impetus to drive underwriter provide high quality underwriting service, consequently, the more higher reputation' rank, the more higher underwriting fee underwriter can charge, which is a reflection of reputation capital's value, is also foundation of building and maintain reputation mechanism. This dissertation's main theoretical analysis is composed of above three relationships According to theory before-mentioned, this dissertation empirically analyses underwriter's reputation in China's issuance market of security, the result of empirical analysis show that three theoretical relationship above-mentioned, on basis of underwriter's reputation mechanism, all can't be confirmed by data of China's issuance market of security: First, there is n...