An Theoretical And Empirical Study On The Relations Between Investment Banker Reputation And IPO Underpricing--based On Chinese Stock Market

A large amount of empirical research both at home and abroad have shown that IPOs have been underpriced in the security markets all around the world. This phenomenon exists not only in the developed country but in developing countries. Scholars have put forward many kinds of theories to explain the puzzling phenomenon. The intermediary's reputation theory is one of this theories.The theory of investment bank reputation considers that a prestigious investment banker can reduce the ex ante uncertainty and lower the degree of IPOs underpricing more effectively than a common investment banker. But it is unknown whether this conclusion applicable to developed country is true to Chinese market. The paper sets up IPOs models including investment banker on the basis of foreign models to prove the formation mechanism of investment bank reputation from static and dynamic respects, then draws inferences and demonstrates them.This paper studies the applicability of investment banker reputation model to china by using the data of 273 IPOs in shanghai and Shenzhen security markets from March 2001 to April 2004. The result indicates that there are not remarkable relevance between investment banker reputation and IPOs underpricing. That is to say , the theory of investment bank reputation is not applicable to our country. At last ,we suggest some measures to improve the information-certified efficiency of investment banker.