The Influence Of Liquidity Risk On IPO Underpricing In The Order-driven Market

IPO (Initial Public Offering) underpricing phenomenon has existed in all the capital markets of the whole world for long time. Since it was brought out by American scholars Ibbotson and Jaffe, lots of scholars have study the problem from all kinds of perspectives, such as information economy, game theory, behavior finance, micro market theory and system economy. But by now, there is none of solutions that can be thought is a good explanation to the cause and how can we do to treat it. So, IPO underpricing phenomenon has been thought to be one of the ten unexplained question up to date. Going with the development of finance study, the influence of liquidity risk to capital market has attracted more and more attention of scholars. By now there has been studies proved that liquidity risk is a systemic factor in the second market. This paper aims to analyze the influence of liquidity risk on IPO underpricing in the order-driven market. The core content includes:1. This paper analyzes the difference of the offering policy and IPO underpricing phenomena between aboard and home. With the beginning of the current situation of IPO, this paper analyzes the common mechanisms and the different influence on IPO underpricing, and compares them with our country. It is found that the offering policy is the most important reason to the high IPO underpricing of our country, and on this basis, the paper brings out several suggestions.2. This paper analyzes the characters of IPOs in liquidity risk, using the four-dimensional method and price-volume together index with the help of tick-by-tick dates. From the intro-day side, IPOs'liquidity risk shows"L"shape; and from the inter-day side, just the same. All these show that at the beginning of offering, IPOs have higher liquidity risk than others. It is found by statistical method that the liquidity risk of different IPOs has the direct relation with IPO underpricing. 3. This paper brings out the formation process of lPOs'liquidity risk in the order-driven market from the side of asymmetric information, and studies the influence of liquidity risk on IPO underpricing separately under the circumstances of fixed-price offering and bookbuilding offering. To the fixed-price offering, this paper uses the"two step model"describing the offering process, combines with the Bellman optimization theory, and constructs the equilibrium quote model. On the base of this model and the decision of IPO investors, this paper analyzes how the liquidity risk influences the IPO underpricing and the factors influencing liquidity risk are how to influence the IPO underpricing. This paper brings out the estimation methods of these models. To the bookbuilding offering, this paper separately analyzes the pricing process under the circumstances of full disclosure and not full disclosure, and finds that the liquidity risk of different IPOs has the direct relation with IPO underpricing on not full disclosure. At the same time, this paper finds that the bookbuilding offering method of our country can not fully disclose the private information, and liquidity risk is the important factor of IPO underpricing.