Study On The Formation Merchanism Of Chinese IPOs' Stock Price

China's stock market has been an important part of economy since its establishment. Since the market is undergoing dramatic reform and development, it is necessary and important to study the forming mechanism of China's stock price. This paper summarizes the theoretical and empirical researches on equity pricing, analyzes the formation merchanism of Chinese IPOs' stock price and the main factors affecting IPOs price, introduces all kinds of evaluation model and sale mechanism of overseas stock exchanges. Based on above works, this paper sets up optimal IPOs pricing model and the book-building distribution method. By investigating and analyzing specific issues of Chinese IPOs pricing, this paper provides some advices to the regulators in order to improve Chinese IPOs' pricing efficiency.There are four contributions in this paper:First, draws the conclusion that the IPO book-building system cannot highly improve the efficiency of Chinese IPOs through applying means comparison and stepwise regression analysis. The first-day return and the first-week return of IPO is still higher than that in most of other countries. The most important factors influencing IPO book-building effects are information incentive and information identification. But the direction of IPO innovation is right, we still need to improve the system, the stock markets and the supervision of professional association must be strengthened; the force of information-release in company management must be increased; a system to fix prices for the innovation of issuing system and its environment must be established.Second, in the past few years, quality Chinese firms flocked to overseas marketsfor raising capital. The performance of the H share market and Nasdaq should serve as guidance to China's domestic market. There are many H listed companies find their way to A share market, simultaneously, many domestic great firms go publicboth in domestic and overseas markets, such as A+H, so the domestic equity exchanges have to improve the pricing and saling systems in order to keep the consistent price of the same listing company. The domestic stock exchanges should set up different market for the listing companies of different scale, the different markets might adopt different pricing and distribution system.Third, by analyzing the phenomenon of holding shares each other by the listing companies, the paper points out that the share reforms would not solve the system problems of the stock market completely, although the overhang problem resolved by making nontradable shares tradable.The last but not the least, by comparing the stock issuing systems in the mature markets, this paper investigates the essential content in mature markets is the competitive contracting system and the evolutionary system of the internal division of labor. For example, in underwriter contract, underwriter would make great efforts to search the information from issuer and investment, the degree of information asymmetry would be decreased. The pricing regulation in the strong market would reduce the IPOs pricing efficiency and result in high underprice or hot-issue market. Over-strict pricing regulation is not the measure to overcome the financial distortion, but the cause to make financial distortion.