An Empirical Study On IPO Under-pricing Phenomenon Of GEM In China

After preparing for nearly ten years, GEM in China was finally opened officially, followed by IPO under-pricing problem. As our society is still in economic transition period, capital market system is far from perfect with respect to that of the West, and IPO pricing is unreasonable, under-pricing phenomenon is more serious accordingly. And as for the new GEM in our country, these these problems are more prominent. Compared with the current motherboards and SME market, the risk existing in the GEM is relatively high. Listed companies in the GEM are mostly small-scale and established for only a short time. Their performance is not outstanding. They are faced with uncertainty of multi-operational level. Ultra-high IPO under-pricing rate will cause fluctuations in the GEM, detrimental to their effective allocation of resources, and at the same time will hinder its functioning and growing healthily. Therefore, the study of IPO under-pricing in our GEM has a positively theoretical and practical significance on perfecting the market system of GEM in China, improving the efficiency of financing for small and medium enterprises and operating environment in Chinese capital market.This paper focuses on the GEM in China to discuss the phenomenon of IPO under-pricing. Firstly it reviews the relevant theoretical results at home and abroad, and analyzes the development process and market characteristics of our GEM deeply. Learning the development experience from other countries and regions, GEM of our country has both overseas common features but Chinese characteristics. On this basis, using qualitative analysis method, it summarizes the factors impacting IPO under-pricing of our GEM. There are four aspects, including the behavior of investors, the growth of companies, market heat and the degree of information asymmetry, which initially structures the theory framework. Then it starts empirical test. It selects a total of 13 explanatory variables reflecting above four areas and studies the GEM IPO under-pricing situation comprehensively using quantitative analysis and stepwise regression methods. It comes to its conclusion finally. There exists a relatively serious GEM IPO under-pricing phenomenon. The first cause leading to this problem is influence of investors'emotion. The second one is a high degree of information asymmetry and the low transparency in Chinese market. Finally the imperfect pricing mechanism brings IPO under-pricing to GEM. To solve these problems, this paper puts forward policy and recommendations in the end. Strengthen the supervision and education on the investors, including institutional and individual investors. Perfect the IPO pricing mechanism of GEM. Finally further improve market transparency and reduce information asymmetry.