A Study On Underpricing And Long-run Underperformance Of New Stock In Chinese Securities Market

Customarily, new stocks include initial public offering (IPO) and additional offering stocks. However, the IPO is special because they have not price from the historical trading. So this pepper only discusses the IPO excluding the second offering stocks. In the nearest thirty years, the underpricing and long-run performance of Initial Public Offering shares become the two hotspot question in the field of new issues.Since Ibboston (1975) firstly studied systemically the relationship between the offering price and the first day close price and gave some reasons for the question, the IPO underpricing, that is, the phenomena of offering price is lower than the first close price, have become one hotspot about IPO research. In the past 30 years, a lot of theories were raised to explain IPO underpricing. However, up to now none of them is recognized the theory that find the really reason. From this point, Brealey and Myers (1991) consider the underpricing as one of the ten "puzzles" in modern finance study.Following the underpricing tightly, the long-run price performance of IPOs is another focus. Because that the long term return rate of IPOs lower than the benchmark rate is a common fact in the world, the long-run price performance is usually called long-run underperformance. The paper "The long-run performance of initial public offerings" by Ritter (1991) published on Journal of Finance served as the prelude of study on it. Different to the study of underpricing, the time window of long-run underperformance often is about three to five years, during this time, maybe many things would happen, so the mainbody of study on long-run underperformance is the method to describe the extent of underperformance not the reason to explain it.The results from the empirical studies show that the underpring of IPO, which appears in other countries, exists in China's securities market too. Moreover, the range of it is very large. Because China's securities market is in an unusual historical period of transition from planned economy to socialism market economy, any theory put forward by foreign scholars can't be used simply to explain the underpricing in our country. On the other hand, the research on underpring and long-run underperformance in our country is still on the stage of empirical study. And the relationship between underpricing and long-run underperformance is not reached by home literates.Based on the situation stated, this thesis studies the underpricing and long-run underperformance of IPO in our country systemically. The main innovations are: â‘ this paper brings forward a conception of short-term investment return; â‘¡ from the point of maximizing their benefit, this paper gives a model to study the asymmetry between issuer and underwriter. The model tells us that the underpricing is an equilibrium that can maximize benefits of the both sides, moreover, that can assure the offering successes; â‘¢ we give a model to explain the special question, which is the abnormal IPO underpricing from public firms dominated by government. It is well known that there are many companies coming from SOEs in our securities market, so the controller controlling is easier to occur. Based on two models of Rock (1986) and Habib (2001), introducing the conception of control rent, we model a new theory frame for us to explain the strange phenomena. â‘£ this paper uses the Fama-French Three Factors model to study the long-run performance in our country for the fist time, and investigates the relationship between initial return and long-run underperformance under this theory frame. The result shows that the initial return has information for forecast the long-run price performance. This thesis is consisted of seven chapters. Chapter one is the introduction and gives some background about the question. Chapter two summarizes the theory and experience studies on underpricing and long-run underperformance all over the world, and gives some comments.The body from chapter three to five, which studies on underpricing, is the emphases...