An Empirical Study On The Underpricing Of IPOs In China "A" Shares Stock Market--Based On Shanghai Stock Market

A large number of empirical results have shown that IPOs have been underpriced in the capital markets of different countries. This phenomenon not only exists in the developed countries, but also in the developing countries.The stock market in China is a new developing market in the process of transformation with high uncertainty and large information asymmetry. After studing the development of Chinese A share initial public offerings (IPOs) market, we investigate the IPOs underpricing in China by using the data of new issues in Shanghai Securities from January 1997 to December 2002 based on the former researches. The empirical result indicates that A share IPOs underpricing could be explained by the uncertainty model. Furthermore, our study finds that it is the institution defect of new issue market, Imperfect information disclosure, over speculation of the investors, abnormal equity structure of the issuers and the unreasonable pricing base that can explain why IPO returns are too high. At last, we suggest some measures to improve the IPO efficiency in China.There are three characteristics in this thesis. Firstly, our analysis is loosely linked with the market factors and the institutional factors. Secondly, we set up an uncertainty model to explain the high returns on IPOs in the stock market of China. Thirdly, we probe into the inner reasons for abnormal short-run returns on IPOs by approaching the influence of IPO systems on new issues.