An Investigation Of Underpricing And Factors In IPOs

With the enlargement of the initial issued stock scale, the security market of China has developed rapidly in recent years. For companies, successful IPO can not only raise the fund in order to expand business scale and invest in the projects with profitable prospect, but also can help them to improve their capital structure and administration structure. The development of the security market of China is not merely shown as technical indicators, it is also reflected in the perfecting of the market operating mechanism and management system. The underpricing of newly issued stock is a common problem in global financial market, especially in China. After close examination, we carry on a systematic and deep discussion on it.In the first place, this paper makes a study of the underpricing of newly issued stock in the domestic and international stock market.Secondly, based on the data of the security market of China, we carry on a positive research on the influence factors of the underpricing of newly issued stock, applying the plural linear regression model. We finally find that a serious underpricing of newly issued stock does exist in A stock market of Shanghai and Shenzhen. By contrast, the pricing of the B-share market seems more rational. Meanwhile, we examine the suitability of the model and find that the model is more suitable for the explanation of the underpricing of A-share than that is of the B-share unexpectedly. This has offered certain research foundation for improvement of the model in the future.Finally, on the basis of analysis and discussion of the result of positive research, we attempt to offer some countermeasures and suggestions to supervision authorities, new stock issue participants and investors.