A Study On IPO Financing Motivation Of Chinese Companies

Based on behavior finance study, transaction cost theory and system vicissitude theory, this paper studies the factors of IPO in china by economic tools of statistics, econometrics method and financial theory. The paper also explains the periodicity of IPO, analyses the entry chance of IPO, and points out corresponding policies. The paper contains seven parts as follows:The first part reviews the IPO theories comprehensively. It briefly introduces some theories related the IPO motivation, such as financial theory (includes limited rationality and limited arbitrage), game theory, system vicissitude theory and transaction cost theory.The second part introduces the history, system evolution, present situation and influence of IPO. It points out the unreasonable financing exiting in Chinese companies. It also introduces the IPO of overseas and the international mutual IPO financing between America and European Union. This part researches the periodic changing of IPO quantities and empirically analyses the co integration among the quantity of IPO, the Shanghai Composite Index and the Shenzhen Component Index. The conclusion is that the quantity of IPO is impacted by the environment of the whole economy.The third part introduces the necessary conditions of the IPO and what companies should do before IPO activity. Later it analyses correlations between some factors of IPO, such as profit earning rate, change rate, increasing rate of GDP, raise funds and circulation value. This part considers that PE is the more important factor and built a polynomial distributed lag model to study the relations between them. It concludes that the economy has fewer impacts to the IPO market after five months.The fourth part studies the income and cost of the IPO. It studies the cost of IPO when there exits asymmetric information. This part use real option approach to studies the relations between the IPO motivation and cost, and then built a model of motivation decision and gets the critical profit point of IPO activity.The fifth part explains how the company selects a good chance of IPO. The paper points out that the stock market exits overreaction and the investor's emotion influence. It analyses the best chance of the IPO with enterprise life cycle theory. It discusses the balance point of the IPO motivation by supply and demand balance analysis. The sixth part points out that the Chinese IPO will develop rapidly with the economy developing and increased wealth of the people.At last the paper makes a conclusion and gives some proposes of policy, finance and investment.The theme of the paper is why companies financing by IPO. The main clues is that when companies meet the basic conditions of IPO, they will choose the right time of IPO and realize the IPO financing motivation if the income of IPO is larger than the cost.The IPO motivation research is a complex subject because it not only involves the cost and income but also is impacted by the enterprise development stage, subjective vision, market conditions and mental state of the investors. Therefore, the need to integrate various research achievements, multifaceted, multi-perspective of the enterprises listed motivation, combining economics, psychology, finance, the game theory and other theories of knowledge and a more satisfied with the research results. In this paper the author can hope for the future to continue to study the subject academics play a role in enlightening, and look forward to a better IPO motivation research literature.