Study On IPO Pricing Efficiency In China Stock Market: Based On Perspective Of Social Capital

IPO underpricing, regarded as one of "Three Abnormal Phenomena" in IPO activities, is still a hot topic concerned by academics. IPO phenomenon exists worldwide, especially in China capital market. According to statistics, IPO underpricing rate in China is as high as338%. The direct cause of IPO underpricing seems like separation between stock issuing market (primary market) and stock trading market (secondary market), but in fact the real reason is market's pricing efficiency. If pricing efficiency of sotck market has suffered serious losses, the IPO price will be significantly deviate (up or down) from the "fair price", leading to separation between issuing price and market price. However, most existing papers just focus on representation of IPO underpricing, but ignore market's pricing efficiency behind IPO.When concerning on China's capital market, we found an interesting phenomenon of retired government officials in executives of the listed companies. Many studies suggested that these special executives could bring enterprises considerable benefits such as tax incentives, government subsidy, and financial loan. In fact, these executives in close touch with government could also create various invisible benefits. The resource of these invisible benefits is just so-called relation capital of those executives which was accumulated during work in government. In our country, many executives of listed companies have been government officials of CSRC or IPO Approval Commission, thus what an effect their relation capital will have on firm's IPO activities? Sociological scholars such as Putnam, Coleman suggested that social capital can reduce trade cost, and improve efficiency of economic operations. Considering relation capital itself is one part of social capital, and inspired by social capital theory, this paper will execute a study on IPO pricing efficiency on the perspective of social capital.Firstly, introduce focus of this paper. This is mainly the content of Chapter1. This part presented the phenomenon of abnormal underprcing in China's stock market, and the other interesting phenomenon, so many former government officials in executives of China's listed companies. Inspired by these phenomenons, we tried to research IPO underpricing in China's capital market on the perspective of social capital. Through literature review, we found IPO pricing efficiency is a new idea in study of IPO underpricing. Finally, we decided to focus on IPO pricing efficiency and study on the perspective of social capital. The framework of this paper is founded on above thoughts.Secondly, theoretical analysis. This is mainly the content of Chapter2. This part theoretically explored the mechanism of social capital impacting on IPO pricing efficiency.We analyzed how three main factors of determining stock price were influenced by socialcapital, thereby deduced the theoretical path of social capital affecting IPO pricing efficiency,finally founded concept model of this paper.Thirdly, empirical studies. This includes Chapter3, Chapter4, Chapter5and Chapter6.This part executed empirical studies on the effects of social capital on IPO pricing efficiency.Chapter3used stochastic frontier model to successfully split IPO underpircing into deliberateunderpricing in pirmary market and factitious high-price in secondary market, then exploredreal reasons of IPO underpircing in Chi'nas stock market by estimating IPO pircing eiffciency.The attempt of this chapter is to test our idea proposed in Chapter1and empirical models.Chapter4brought social capital into discussion about IPO pircing eiffciency, mainly showedus the effect of entrepreneuiral social capital (social status, reputation and Guanxi) on IPOpricing efficiency. Chapter5descirbed the characteristics of networks of listed companiesusing professional software Ucinet, and then did an empirical study on relation betweencorporate social capital and IPO efficiency based on data received above. Chapter6analyzedthe effect of social environment, regional social capital, on IPO pircing efficiency, and testedinteraction effect and mediation effect among entrepreneuiral social capital, corporation socialcapital and regional social capital by empirical study.Finally, conclusions of full text and future bluepirnt. This is content of Chapter7,including main conclusions, limitations and future research planning. By theoretical andempirical study, this article received five main conclusions as follow:(1)On the whole, pircing eiffciency is high in pirmary market of Chi'nas stock market,'which suggests deliberate underpircing doesnt exist, and the reason of IPO underpircing isfactitious high-price in secondary market. However, its reason needs to do specific analysisunder different contexts duirng different periods.(2)Entrepreneurial social capital has significant effects on both pirmary market and""secondary market, especially Guanxi with government among these factors.(3)At present, corporate social capital has significant effects only on pirmary market mostd'ue to lack of resource of social networks in Chinas listed companies.(4)Trust, norms and social networks in regions have different effect on IPO pricingefficiency, but overall regional social capital will help enhancing IPO pircing eiffciency.(5)Tirple interaction effect exists among entrepreneuiral social capital, corporation socialcapital and regional social capital, but no empirical evidences prove mediation effect in ourstudy. Throughout full text of this article, there are three following innovations:First, this article explored the real reasons of IPO underpricing from the perspective of 'market pricing efficiency', which is an expansion on existing research paradigm. In empirical studies on IPO pricing efficiency, we introduce stochastic production frontier model and stochastic cost frontier model in primary market and secondary market, respectively. This idea is not like former paper using a same model in two different markets.Second, this article introduced sociological theory into corporation finance field, and explored the influence of social capital on IPO pricing efficiency. This is a useful complement to existing researches. In the study of In the study of social capital, this paper built up a systematically analytical framework of entrepreneurs, enterprise and regionally social environment. We supply a little new ideas that other scholars could learn from when also analyze social capital in another field.Third, this paper discussed impacts of social capital, categorized to entrepreneurial social capital, enterprise social capital and regional social capital, on IPO pricing efficiency from both theoretical and empirical aspects. The attempt made in this paper has several reference values for the study of either IPO pricing efficiency or social capital.