The Sequence Of Market Oriented Reform On Offer Pricing System In Chinese Stock Market

Founded on the transition economics, Chinese stock market is the result of forced institutional transition by the government. The market has obvious Chinese features,one of which is that the offer pricing system is often changed under the dominant of the government,expressing as the winding process of regulation —deregulation —regulation —deregulation. This kind of reformation process makes known that the government achieves hard market oriented of stock offer pricing. Undoubtedly, the target of market oriented pricing is right seen on the development orientation of Chinese stock market. However, to the sequence of the reform, We think that because of the implied prerequisite doesn't exist, the market oriented reform of offer pricing make mistakes in the reform sequence. The manifestation of the mistake is the volatility of the offer pricing system and the policy lack continuous and anticipated quality. The mistake will result in the decent of the capital allocation efficiency and the zoom out of the imperfect of the secondary market, at last enhance the market risk, cause the fade of the stock market. The right sequence should be improving the operational efficiency of the secondary market first, then carrying out the market oriented reform of offer pricing system. Above is the core idea to the dissertation. We dissertate it detailed from seven sections. Chapter One presents ordinary theory basement. From the point of new institution-al economics, institutional is significant, which is the first element in explaining the economic growth in a country or area. Economic growth can be realized through the function of institutional, such as decreasing the uncertainty and transaction cost etc.. Yet, based on the bounded rationality and uncompleted information, institutional is not efficient in reality. In order to achieve efficiency in the institutional innovation, there are two key problems: the adaptation of institutional to the institutional environment, the sequence of institutional arrangement. Based on the function, the efficient of system arrangement in stock market should be capital allocation efficiency. Stock offering price determine the capital allocation efficiency, so the offer pricing system is the root system for the exertion of stock market function. The selection of offer pricing system for Chinese stock market is a significant problem that is concerned by the government and scholars. Chapter Two summarize of the research on the offer pricing system in the international stock market. There are three main offer pricing system, fixed pricing system, book-building system and auction system, hybrid pricing system is also used often. This three system show difference in aspect such as issuing cost, the accuracy of vale and employed scope and everyone posses'strong point and defects. The ethical hazard problem of fixed pricing system, the agent problem of book-building system and the under investment problem in auction system are unconquered intrinsic conflicts. The advantage of pricing system is comparatively defined. Hence, the selection of pricing system should be considered from the point of pricing efficiency, market development and the protection of investors etc.. This has significant direction sense for the reform of offer pricing system in Chinese stock market. Chapter Three research on the offer pricing system in Chinese stock market. Regulated offer pricing system played significant action for the stock market foundation and the exertion of its financial function; however, developed stock market should realize the function of optimizing capital allocation and price discovery, which function is based on the market pricing. The transition of function determines the reform of offer pricing system from regulated offer pricing system to market oriented offer pricing system. This section first review the vicissitude process of offer pricing system reform, moreover propose the fundamental reason of the unsuccessful of the reform, which is that the prerequisite of market offer pricing system, the secondary market is efficient, did not exist, and the government neglected the sequence of market oriented reform of offer pricing system. The concrete logical relation is such: Stock market's efficiency ultimately refers to the capital allocation efficiency whichis determined directly by the efficiency of IPO pricing. Under the regulated pricing system, the offer price has nothing to do with the market price in the secondary market. Under the market pricing system, the offer price takes the deal price of stocks in the secondary market as reference. Therefore the logical relation is as follows: capital allocation efficiency←offer pricing efficiency←the operation efficiency of the secondary market, which means the price discovery function, at the same time, the offer market has a feedback effect to the secondary market. See on the above-mentioned logical relation,in case to guarantee the offer pricing efficiency, the prerequisite should be the secondary market has function efficiency. In other words, good companies and bad companies has obviously different price or the market is efficient. Thus we can deduce that the market oriented reform of offer pricing system has a connotative prerequisite, which is Chinese stock market is efficient. If the prerequisite does not exist,then the market oriented reform of offer pricing system will not succeed naturally,more severely, which will result in the zoom out the low function efficiency of the secondary market. According to this logic,under the circumstance of unobvious raise of the market efficiency, restarting the market pricing reform in 2005 will not attain predictive effect. The first issue priced by book-building method in 2005 has low offer price and high closed price in the first trading day, which confirms our reference. The natural problem is,whether our logic is right,whether Chinese stock market is efficient. We will carry on empirical analysis in next chapters。Chapter Four, the empirical analysis on the stock market efficiency. There are many methods to test the stock market efficiency. According to the Efficient Market Hypothesis (EMH), the main stream method should be describing the running character of stock price using financial time series models. We use the generalized spectral derivative method test the market efficiency of Chinese stock market during the period from 1997 to 2004. The result shows that the stock market does not reach weak form EMH. The robust test by analyzing the behavior of investors and stock market movement confirms the previous result. The two behaviors are tested by calculating the turnover rates and the rate of comovement stocks. The regression analysis by means of the model of cross-section data and panel data make known that the capital allocation efficiency of Chinese stock market is low. Therefore the empirical test shows that the prerequisite does not exist and thecapital allocation efficiency is low generally. Hence the unsuccessful of the market oriented reform of offer pricing system is rational. Chapter Five, the empirical analyses on the relationship of stock offering price and the intrinsic value. This section tests the change of offer pricing efficiency after the market offer pricing reform. In a perfect market, stock price should fluctuate up and down around the intrinsic value, and will not diverge for a long period. Thus, the comparative analysis on changing of the relationship of stock offering price and the intrinsic value could test the change of IPO pricing efficiency. The empirical analyses include two sections: the main component regression analysis on the offer price and the fundamental financial indexes, using the comparative value model to test the influence of the offer pricing reform on IPO value. Result makes known,IPO price reflect the intrinsic value under regulated pricing system and the market reform does not hence the pricing efficiency. The reform boost IPO price and zoom out the imperfect of the secondary market. The comparative value model test makes known that the market pricing reform does not impel the approach of IPO price to the intrinsic value. Chapter Six, the theory interpretation of system efficiency in the market oriented reform of offer pricing system in stock market. The theoretical reason of the inefficiency of market pricing system arrangement in Chinese stock market lies in the inadaptable of system arrange to the system circumstance from static point view, and the adopting of error system arrangement sequence from dynamic angle. This section analysis's from the point of static point of view. Based on the analysis of system circumstance of Chinese stock market from the point of function location, listed company quality, stock structure, investor structure, law system, we conclude that regulated pricing system suit the system circumstance more than the market pricing system. Hence,good and advanced system will not surely bring happy results, system arrangement is efficient only when it adapt to the system circumstance. Both are pernicious to deny regulated pricing system easily and admire market pricing system excessively. Chapter Seven, The sequence of market oriented reform on offer pricing system in Chinese stock market. Previous theoretical logic is that the operation efficiency of the...