China Growth Enterprise Market IPO Underpricing Emprical Study

At present, GEM is undoubtedly the focus of China's capital market. The 2007 outbreak of U.S. subprime mortgage crisis hit the global economy, China's economy is affected by facing grow, expanding domestic demand, adjust the structure of an arduous task. In this context, the State Council agreed that the Shenzhen Stock Exchange establish GEM. GEM opening ceremony was held on October 23,2009. The birth of GEM can be described as "Decade of grinding sword", devoted many efforts and expectations of market participants.the efforts and care of the GEM become to the common goal of many participants and scholars. However, the initial 65 listed companies of GEM has attracted wide attention. Because investors fanatical pursuit these listed companies. At last the average IPO underpricing of these list companies rate of 65%.Using a database of 65 listed compamines from October 15,2009 to March 23,2010 on Shenzhen Exchange GEM, this research has explored the factors which cause the IPO underpricing and exmined the applicability of foreign IPO underpricing in China. According to existing research,combined with GEM actual situation, This research selects 10 explantory variables which may influence the IPO underpricing. Then this research has built a linear regression model about the IPO underpricing, examined the relationship between the explanatory variables and IPO underpricing. So the existed theories about IPO can be tested on GEM.The empirical result found that the degree of IPO underpricing is still high at the beginning of GEM. Investor sentiment on behalf of turnover listed on the first day and IPO underpricing significantly positive relationship. the lottery rate measure conformity effect was a significant negative relationship with the rate of IPO underpricing. The high level of IPO underpricing is due to the behavior of market and participators. Foreign IPO theories in mature market are not very effective in GEM, but the theory of asymmetric information is effective in some degree. In order to suppress high level IPO underpricing phenomenon on GEM, this paper suggest to advocate a rational investor education and speed up the supply of new shares on GEM1. Finally, this paper presents research prospects.