The First Day Of Ipo Underpricing And Ipo Reform Study

A thorough and embedded research on IPO pricing in China stock market is studied in this dissertation after the implement of examination system. Ipo underpricing is a highly concerned problem by China Securities Regulatory Commissions, investors, intermediary institutions and issuers during the development of stock market. After the implement of Inquiry System in 2005, all the participants want this new offering system to resolve the problems of "IPO underpricing", "the substantive stock of fund on the primary market for IPO" and so on. However, from the actual situation of these years, this method did in a poor way. Therefore, there are more and more voices that ask for the reform of IPO pricing and offering from the investors and theory horizon. They ask for harmony the twisty relation between the primary market and the secondary market, and the maintenance of the small investors'benefits. In this situation, it is quite important for a research for the IPO pricing system in China capital market and some suggestions have been provided in this research.After the Chinese stock exchange market was built in the 20 centuries, there has been unceasing development of IPO pricing system. Before the "Security Act" put into practice, the main method of IPO pricing in China is the government leading system through administrative offering, then the method is transmitted into market offering. Many scholars made beneficial researches in the IPO pricing, most of them focus on the explanation of IPO underpricing, and they made plenty of results in this field. This dissertation chooses a relatively new perspective, which studies IPO pricing mainly after the implement of the examination system of IPO in China. After the examination system of IPO was implemented, China stock pricing has experienced several system adjustments, early days with liberalization of P/E ratio, later limited control over P/E ratio and finally a more popular accumulated tender Inquiry System. Institution transitions provide objective conditions for our study. In addition, this dissertation considers that the IPO process includes issuance, listing, and short-term trade. Only when this process has been gone on smoothly, IPO could be considered successfully. Based on this thought, this dissertation mainly studies three aspects: issuance and listing pricing, IPO underpricing, and aftermarket performance. The specific research objectives and questions are:1) Analyzing the reform process of China IPO pricing and distribution system systematically, and clarifying reform objectives and main ideas of various stages.2) Exploring IPO issue price and the relationship between the secondary market prices during the first day and financial indicators reflecting the company's intrinsic value.3) Testing the relationship between IPO issuance system and IPO pricing efficiency;4) Proof-testing the effects on discount price of IPO after the IPO reform measures put into practice.5) Providing the recommendations on the new IPO policy.This dissertation mainly contains three parts:the first part, Chapter 2 and Chapter 3, is theoretical synthesis and institution background; the second part,including Chapter 4,Chapter 5 and Chapter 6, is the main body. The Chapter 4 testifies and analyzes the correlations between IPO issuance and listing prices before September 2008, when the IPO came to halt. The Chapter 5 analyzes the new IPO rules passed on 2009 and its effects. The chapter 6 testifies and analyzes the correlations between IPO issuance and listing prices after June 2009, when the IPO restarted. The third part, Chapter 7 and Chapter 8, is the research conclusions and policy recommendations about IPO issuance institution reform. The final part also reviews the limits of this dissertation and the further research areas.The first part is theoretical synthesis and institution background. The theory of Chapter 2 is divided into four parts:(1) current situation of international research about IPO underpricing; (2) current situation of domestic research about IPO underpricing; (3) the theory of secondary market stock pricing and related comments; and (4) a review about research publications of shot-run stock price performance after IPO issuance. Chapter 3 studies the development of our stock market, the evolving progress of our IPOs and the background of our IPO underpricing. This part provides a theoretical and practical basis for the empirical research.The second part is the main body, testifying the research, based on the theory of IPO underpricing. Chapter 4 illustrates some factors that affect the closing price on first day of A share IPO and related assumptions. In addition, through the A share market indicators, Chapter 4 shows how these financial indicators affect the closing price on first day of IPO on statistical basis. This part provides verification for research conclusions and policy recommendations in next chapters. In order to establish a more reasonable and accurate model for verification, the following variables that affect IPO underpricing are considered in this dissertation with the insight of the former researches:PE, ROE in previous year of the issuance, IPO opening price, number of subscribers, size of issuance, turnover rate, ROA in previous year of the issuance (Total return on asset), gross margin of sales in previous year of the issuance, and growth rate of total profit in previous 3 years before issuance. Chapter 5 includes the main reform measures of the new IPO rules passed on 2009 and its effects, and Chapter 6 is the proof-test of the new IPO reform through the empirical research on the IPO data after June 2009, when the IPO restarted.The third part is the summary of this dissertation. Based on the empirical research conclusions, the author proposes some policy recommendations on the 2009 new IPO rules. Finally, this part points out the shortages and some questions deserved our attentions in the future study.The main innovation of this dissertation is the new contents and the new perspectives. By leveraging the public data, this dissertation systemically studies the correlations between IPO price after implementing authorized mechanism and financial indicators, and analyses the acts of IPO reform measures. By collecting the market data after the IPO restarted, this dissertation does a thorough empirical research on the IPO reform measures. Based on those researches and conclusions, the author provides some suggestions on the IPO policy, which is time effectiveness.