What Factors Influence IPO Discount?--An Empirical Study Of Listed Chinese GEM Companies

Since 1970s, people has concerned that the listed companies would usually experienced high discounts when they were initially public offered. Scholars in and abroad have tried various ways to explain this phenomenon. The China's securities market has experienced 20 years of development, and the listed company's IPO discount problem has also been widespread concerned in academia and industry. The China's Growth Enterprise Market was finally established in October 2009, and there were significant discount phenomenon of the GEM's IPO.This IPO discount of listed companies is divided into two stages in this paper. The first stage is the distribution stage. In this stage the IPO discount refer to the difference between the book value per share of listed companies and the issue price of listed companies. The second stage is listed transaction phase, referring to the difference between the price listed on the first day of trading and the issue price.This paper reviews asymmetric information, signal transmission theory and behavioral finance theory. Chinese and foreign scholars have used these theories to explain the IPO discount phenomenon in early literature. Signaling theory tell us the relationship of the first phase of IPO discount (IR1) and the second phase of IPO discount (IR2). And the asymmetric information and signaling theory analyze the factors impact the first phase of IPO discount, and influence direction. The behavioral finance theory of overreaction, under-reaction and self-attribution hypothesis explain the factors of second phase of the impact of IPO discount, and the direction of influence.By analyzing 153 companies which were initially public offered in the GEM during 2009 and 2010. This paper expresses the systems features and statistical features of China's GEM. Using this sample, we also verify some hypothesis of this research. There is negative correlation between the IR1 and IR2. The relationship between equity ratio of top management team and IR1 is positive, while the relationship between venture capital support and IR1 is negative. The correlation between the independence of Board, the underwriters reputation and IR1 was not significant. There is positive correlation between Turnover, hot market and IR2, and negative correlation between success rate of subscription and IR2. While the correlation between income before listing and IR2 is not significant.According to the conclusion of this study, investors can change the way of making decisions, learn more knowledge and methods to make rational decisions. While the high-quality listed companies can use market-proven ways to transmit good news, to make themselves understand by investors. We all know high IPO discount is not related with sound market mechanism. This paper suggest that supervisor change the issue system to the registration system, introduce selling mechanism to the market, and enhance information control, to ease the problem of asymmetric information, therefore make China's securities market developed healthy.