Study On The Effect Of Securities Underwriter's Reputation-Based On The Chinese Stock Market

The dissertation studies the reputation effect of Chinese underwriter on the stock market comprehensively .The dissertation argues that underwriter reputation effect can be analyed from two aspect of market discipline and regulation policy which construct the whole framework of underwriter reputation. As to market discipline , if the mechanism is effective, there will be three kinds of relationships in separate equilibrium which constitute the whole of market discipline. First ,underwriter's rank of reputation is positive with the quality of issuing firm. Under the effect of underwriter reputation,in order to get more future income and reputation capital, the more prestigious investment banker is inclined and be able to underwriter security of high quality firm. Thereby the relationship between underwriter'rank of reputation and quality of issuing firm is positive. Second ,underwriter' s rank of reputation is negative with IPOs underpricing. IPOs underpricing is direct result of asymmetric information in security issuing marker. The less information asymmetry ,the lower IPO underpricing. While a prestigious underwriter can reduce the ex ant uncertainty and alleviate the degree of information asymmetry, therefore in theory IPO underpricing underwrited by more prestigious investment banker will be smaller than by a common investment banker. Thirdly, underwriter reputation rank is positive with underwriting service's fee. The fact that underwriter with higher reputation will get more underwriting fee is a compensation and encouragement for underwriter to built and maintain reputation, it also stimulate them to provide high quality underwriting services.As to regulation policy of underwriter reputation, the more prestigious underwriter is sure to restrict speculative behaviors to guard the value of reputation capital after weighing the short term of advantage and direct penalty and indirect long term loss. Under the condition of effective market regulation system, underwriter will maintain his reputation to escape big price of the speculative behavior.The dissertation use three kind of index, the amount of underwriter issuing underwriter market share and integrated amount of operation to measure reputation of underwriter respectively. Then,this dissertation empirically analysis underwriter's reputation in our country's stock market after 1999. Time is divided into three-stage to show whether the reputation mechanism is more effective along with time going. The empirical results show that the first two theoretical relationship of market discipline are not confirmed while the third is confirmed slightly. First,there is no positive relationship between the reputation rank of underwriter and quality of issuing firm which is proved by certifying agent theory。Secongd the relationship that the reputation rank of underwriter is negative with IPOs underpricing is not significant, which means that underwriter'reputation can not alleviate information asymmetry in security market. Thirdly, although underwriting fee is positive with underwriter's reputation, the sensitivity is too small. According to the three results mentioned above, some interesting conclusions can be drawed that in our security market, although underwriters' function of information production and certifying agent has no effect, they are zealous of receive underwriter fee. The fact that the empirical test of intergrated amount of operation is better shows at present underwriter market, the bigger security corporation can ask for more underwriter fee.As to regulation policy, my case study indicates the security authority brings negative effect on the reputation of underwriter by the impact on its market share. In this case study, however, the relationship shown in the mature market between the underwriter's reputation and IPO clients' reputation has not been verified. The effect of penalties imposed on underwriters'reputation by supervision act is weak.To sum up ,the empirical test from four aspects of underwriter reputation indicates that function of underwriter reputation mechanism is not effective in our security market, which is an important reason for inefficiency of our security issuance market and underwriter conduct disorder.On the reason of inefficiency of our underwriter reputation mechanism and the theory of reputation, in accord with background of institution transition and evolution of our security issuance market, this dissertation suggest some measures to improve reputation effect and reestablish underwriter's reputation mechanism and underwriter operation behavior.