The Study On Issuing Mechanism Of New Issue In China

With rapid development of IPOs market in China, capital raising from IPOs market reaches 900 billion at the end of June 2003. However, this market also attracts a lot of criticisms and becomes one of the most contentious market. In order to introduce more companies whose price can reflect their fair value, what system government should construct and what kind of method government should adopt have to be seriously considered. In other words, discussion on what new issue system should be necessary. Research on current new issue system could help us to learn the difference with approval system. This plays significant role in making improve on our current issue system.This paper focuses on the characteristics of China IPOs market, and systematically and fully studies this market by adopting economy equilibrium analysis, game theory, positive analysis and normative analysis, including new issue system, issue method, selling method, underpricing, long -run performance, the choice of selling method and so on. All the procedures and internal theory are also extensively discussed. Conclusion and main contents are shown as follows:First of all, compared with different new issue systems applied in international market, advantage and disadvantage of new issue system in China market is discussed. In order to assure the effective role that the authorization system could play, the most important thing is to improve basic stock system, then clarifying right and responsibility of market participants, carry on nominated adviser system. Two principles could beobeyed: (1) information asymmetry between outside investor and public company should be eliminated. (2) Issuing procedure should be market-originated.Secondly, by analyzing advantage and disadvantage of most pricing approaches, the most effective pricing approach is comparable firm approach, especially PE approach. This paper constructs PE adjusting pricing model through VaR technique.Thirdly, based on special characteristics of China stock market, IPOs market model is constructed by utilizing information economy and static complete information game theory. Investors are classified into two categories, one is rational investor, the other is sentiment investor. According to investors' different demand curves and new issues' objective function study, underpricing, long-run performance and other periodical problems of IPOs China market are discussed.Fourthly, this paper constructs a dynamic model of the choice between fixed-price offerings and auctions in IPOs in China, in the basic of the incomplete information game theory. The model discusses the total revenue of new issuer from IPO and SEO, bidding strategies and payoff of investors, the choice of selling method.Finally, new issue system and selling mechanism are built according to IPOs market characteristics, problems we discussed in our relevant models.