Research On IPO Pricing And Innovation Behavior Of Companies Listed On ChiNext

Innovation is the key factor of economic growth and plays an important role in the long-term development of companies.China is firmly implementing the innovation driven development strategy.In 2021,the R&D reached 2.79 trillion yuan,a year-on-year growth of 14.2% and a ratio to GDP of 2.44%.Innovation has important impact on the pricing of assets,especially on innovative companies.At the same time,Chinese capital market is undergoing reform and development.The Chi Next,China’s Science and Technology Innovation Board(STAR)market and Beijing stock exchange were successively established in 2009,2019 and 2021,respectively,which provides more convenient financing channels for innovative companies,strategic emerging companies,small and medium-sized companies with the characteristics of “specialization,refinement,characteristics and novelty”.It provides favorable support for the long-term development of innovative companies.In particular,since the trade friction between China and the United States in 2018,it has become one of the most important works in the field of domestic scientific and technological innovation not to be stuck in core areas.This paper systematically investigates the impact of innovation on IPO pricing and the dynamic changes of innovation behavior before and after listing from both theoretical and empirical aspects,which has important practical significance for promoting innovation of company,improving the development of IPO market and IPO pricing efficiency.This paper uses companies listed on Chi Next between September 2009 and December 2018 as the research sample.And we focus on impact of innovation on IPO pricing and company innovation behavior.The main reasons for doing so are as follows.First,companies listed on Chi Next are mainly innovative companies,which represent a high level of innovative ability and growth potential in China across different industries.In this way,our research will be more targeted.Second,the prospectus of companies listed on the Chi Next will disclose the information of patent and R&D in detail,while companies listed on the Main-Board Market disclose less the information of patent and R&D.In the empirical study,this paper involves the data of companies’ patents and R&D,the sample we selected can better meet the requirements of data availability.Third,compared to companies listed on the Main-Board Market,the listing requirements for Chi Next are more relaxed,especially in terms of issuance scale and accounting performance requirements,so we separate the companies listed on the Main-Board Market from those listed on Chi Next.Fourth,before the establishment of Chi Next,the Chinese stock market experienced several pricing and issuance system reforms.Companies on Chi Next have experienced less institutional change caused by policy and system reform,so our results will be more robust.The research of this paper is as follows:(1)the impact of innovation on IPO pricing in the primary market;(2)the impact of innovation on IPO pricing in the secondary market;(3)the impact of company listing on innovation behavior.This paper includes six chapters,which are in line with the internal logical framework of finding,analyzing and solving problems.The first chapter is introduction,which mainly includes the research background and significance,content and objectives,methods and framework,innovation and deficiencies of this article.The second chapter is literature review.This chapter systematically combs the existing research and literature from four aspects.First,we introduce the research on innovation,including the impact of innovation on economic growth and company development.It also analyzes the reasons why this paper selects patents to measure the innovation.Second,we have systematically combed the research on IPO pricing in the primary market.According to the differences between Chinese capital market and overseas capital market,we define the pricing level and pricing efficiency of IPO primary market more accurately,so as to clarify the research objectives.We further combed the internal logic of the relationship between innovation and IPO pricing in detail.Third,we have systematically combed the research on IPO pricing in the secondary market.On the basis of IPO pricing level in the secondary market,we further clarify the difference between IPO pricing efficiency in the secondary market and IPO pricing efficiency in the primary market.And deeply understand the information asymmetry theory and investor sentiment theory,so as to deduce the internal logic of the impact of innovation on IPO pricing in the secondary market.Finally,we make an in-depth analysis of the innovation behavior before and after listing from another perspective,and combs the agency theory and financing constraint theory in order to fully explain the research results of this paper.By combing the existing research systems,we have mastered the theoretical system and deficiencies of the existing research,defined the research objectives and expandable research fields,and laid a solid foundation for the empirical research and theoretical analysis of this paper.The third chapter studies the impact of innovation on IPO pricing in the primary market.Specifically,we studied the impact of innovation on the IPO pricing level in the primary market by constructing multiple indicators for companies listed on Chi Next from 2009 to 2018,including offering P/E ratio,intrinsic-value-based P/E ratio and industry-value-based P/E ratio.We also investigate the impact of innovation on the IPO pricing efficiency in the primary market,and the distortion of the “window guidance” implemented by the CSRC to the pricing of primary market,and the differences of the impact of innovation quantity and quality.Further,from the theory of corporate finance,we study the mechanism of innovation affecting the IPO pricing level in the primary market.The results show that the innovation has a significant negative impact on the IPO pricing level in the primary market,but it also improves the pricing efficiency in the primary market.At the same time,the “window guidance” has produced important distortions to the IPO primary market.And we also find the negative impact of innovation on the IPO pricing level in the primary market is mainly driven by non-invention patents.Finally,the negative impact of innovation on the IPO pricing level in the primary market is mainly because the higher innovation level,the worse the financial performance of company.The innovation increases the R&D expenditure and financial pressure of companies,and it reduces operation ability,solvency,value and income quality of companies.In Chinese capital market,primary market investors and analysts attach great importance to the accounting performance of companies when they predict the valuation and pricing of stocks.The primary market investors and analysts have a certain shortsightedness to innovation and lack of understanding of the investment income brought by innovation in the future,resulting in the higher the level of innovation,the lower the pricing level in the primary market.The fourth chapter is to transfer the research perspective from the IPO primary market to the secondary market.we studied the impact of patent on the IPO pricing level in the secondary market.Specifically,by combing and defining the indicators of IPO pricing level and pricing efficiency in the secondary market for companies listed on Chi Next from 2009 to 2018,including return on the first day of listing,equilibrium P/E ratio of IPO and IPO premium rate.We studied the impact of innovation on the IPO pricing level in the secondary market,and further investigated the impact of innovation on pricing efficiency and long-term return.We also investigate the distorted impact of price limit in the secondary market.Further,we systematically study the mechanism of innovation affecting IPO pricing level and pricing efficiency in the secondary market through information asymmetry theory and investor sentiment theory.The results show that the innovation has significant negative impact on the IPO pricing level in the secondary market,but it improves the pricing efficiency in the secondary market.In addition,the higher innovation of company,the higher return in the long term.And we also found that the price limit on the first day of listing has an important distortion on the pricing in the secondary market.On the contrary,the price limit significantly increases IPO underpricing by intensifying investor sentiment and encouraging market speculation.Most importantly,information asymmetry theory and investor sentiment can effectively explain the impact of innovation on the IPO pricing level and pricing efficiency in the secondary market.The innovation inhibits the irrational investment of secondary market investors and reduces the irrational sentiment of investors by improving the information transparency of new shares.The fifth chapter systematically studies the dynamic changes of innovation behavior before and after listing for companies listed on Chi Next from 2009 to 2018.We find that compared with the third year before listing,the innovation level of companies in the first two years will be significantly increased,which is driven by non-invention patents,and the number of invention patent applications has not significantly increased,but it has no significant change after listing.At the same time,there are obvious differences among the companies with different scales,leverage ratio,nature of equity and whether there is venture capital support.We find that the innovation behavior of large companies,low leverage companies,companies with PE/VC support and non-family companies has changed significantly before and after listing,while the innovation behavior of small companies,high leverage companies,companies without PE/VC support and family companies has not changed significantly.Further research shows that it is mainly due to the more serious agency problem after listing,which has a greater negative impact on company innovation than the positive impact of easing financing constraints.The sixth chapter is the research conclusions and policy suggestions of this paper.This chapter systematically combs the results of the above research,reasonably summarizes the research conclusions of this paper,and puts forward relevant policy suggestions to increase company innovation and improve the development of IPO market.It also summarizes the deficiencies of this paper and the research fields and directions that can be expanded in the future.Through analysis the existing research,we find that the research on innovation and IPO pricing has been carried out widely,but the scientific definition is not perfect,and there is a lack of unified conclusion and explanation.This paper has the following innovations.First,this paper systematically investigates the impact of innovation on IPO pricing for companies listed on Chi Next.Compared with the existing literature,this paper completely defines the concepts and differences of IPO pricing level and pricing efficiency in the primary market,IPO pricing level and pricing efficiency in the secondary market.This paper supplements the research field of the impact of innovation on the IPO pricing level in the primary market and the IPO pricing efficiency in the secondary market,and enriches the research on the impact of innovation on the IPO pricing efficiency in the primary market and the IPO pricing level in the secondary market.This paper makes a systematic analysis on the above research through investor cognition theory,corporate finance theory,information asymmetry theory and investor sentiment theory.Investor cognition theory and corporate finance theory can effectively explain the impact of innovation on IPO pricing level and pricing efficiency in the primary market,while information asymmetry theory has insufficient explanatory on this effect.Information asymmetry theory and investor sentiment theory can effectively explain the impact of innovation on the IPO pricing level and pricing efficiency in the secondary market.The theoretical analysis of this paper provides a systematic and new explanation for the research on the relationship between innovation and IPO pricing.Second,this paper studies the impact price limit for the companies listed on Chi Next in primary market and secondary market,and makes an in-depth analysis of the mechanism.Specifically,we studied the impact of the “window guidance” on the IPO primary market.We find that “window guidance” distorts the pricing in primary market,which distorts the IPO pricing level in the primary market.Fortunately,analysts’ predicted pricing and industry average pricing are reliable indicators to measure the real pricing of IPO companies.This paper also studies the price limit on the first day of listing in the secondary market.We find that the implementation of price limits significantly increases IPO underpricing by intensifying investor sentiment and encouraging market speculation.The conclusion of this paper has important significance for the reform and development of the IPO market.Third,there are price limit in the IPO primary and secondary markets,this paper defines multiple indicators to measure the pricing level of the primary and secondary markets.The new indicators include intrinsic-value-based P/E ratio,industry-value-based P/E ratio and equilibrium P/E ratio of IPO.This paper also further proves the rationality of the above indicators,which can effectively measure the real pricing level of IPO companies when pricing is limited.We find that the industry average pricing has important reference for the measurement of IPO company,and analysts’ predicted pricing is an important supplementary indicator,which provides a new idea for evaluating IPO pricing and valuation.Fourth,in the research on the impact of listing on enterprise innovation behavior,this paper supplements and refines the research on company innovation behavior through the dynamic research.More importantly,this paper attempts to explain the results through the net effect of financing constraints and agency theory,we find that it is mainly due to the more serious agency problem after listing,which has a greater negative impact on company innovation than the positive impact of easing financing constraints,which provides more comprehensive explanation mechanism for the research on innovation behavior in Chinese capital market.This also provides operable ideas for increasing innovation of companies,especially the increase of innovation quality.