The Research On Offeringprice And Closingprice Of IPOs

At present, the initial return of A shares in China is very high, so researches in academic circles have become popular. This paper provides a comprehensive analysis on the characteristics&methods of Initial Public Offerings(IPOs), offeringprice,first day's closingprice and listing day stock return etc.,by choosing 786 Shanghai Security Exchange and 505 Shenzhen Security Exchange IPOs from January 1992 to March 2004 as the sample,we find that Chinese A share's market has high return , high offeringprice and no risk. Meanwhile,we find that our offering PE ratio is much lower than the trading PE ratio.Through empirical analysis, we have tested some important factors influencing the offeringprice, initial ratio of return and First Day's Closingprice. The major factors which influence the offeringprice are EPS, ROE, the index of offering day, liquid ratio, situation of industry and issue size etc and those of the First Day's Closingprice include EPS, ROE, the index of the listing day, offering price, exchange ratio of the listing day, lottery and exchange numbers on the listing day, among which offeringprice and the index of the listing day are always the major index of the initial ratio of return, the index of offering day, liquid ratio and holding shares ratio for the investors are also the common factors for issuers and underwriters' consideration, and so are the industry factors.We also find that policies and systems of offering price have an important effect on the offering price of IPOs. As for First Day's Closingprice, we construct the IPO model using 5 variables, including offeringprice, EPS, issue size, the index of the listing day and lottery, then we use this model to predict three new shares with precise predict value. At the end of the paper, By studying how IPO market in our country restrains speculations in the secondary market after Green-Shoe Option has been introduced and the mechanism of reducing initial return through cutting down the offeringprice and First Day's Closingprice, we point out the essentiality of introducing Green-Shoe Option to the IPO market of A shares and also make some corresponding strategies for underwriters.The conclusion part we discussing some irrational problems existed in the IPO market and stock market of China. In a word, this paper gives some guide and reference to underwriters, investors, issuers and supervisors in China.