Research On IPO Underpricing In Stock Maket Of China

Many research shows that IPO underpricing exists in financial markets in both mature capital market and Chinese capital market. In order to explore the causes of IPO underpricing, since the 1980s,western financial scholars carried out a large amount of theoretical research, and formatted three representative schools of theoretical explanation, that is schools of asymmetric information, institution and irrational behavior. However, these different schools of explanations are difficult to receive wide recognition by the theoretical circle.Chinese capital market has different laws and features because of the special institution and the constitution of the investor. The article empirically studies the existence of the IPO underpricing and the differences of various markets,and studies if the theories and hypotheses about underpricing cause (including information asymmetry, irrationgality of investors) is suitable in China. The come into existence of registered capital and reputation of underwriters hypothesis represents the applicability of asymmetric information;the gap of issue date and listing date has little influence to IPO underpricing, and the Book-building mechanism brings down the IPO underpricing of Main board but sends up the IPO underpricing of sme board. The shareholding ratio of management level has no influence to IPO underpricing.The lot winning rate, the representative variable of investor sentiment has remarkable influence to IPO underpricing,shows that the Behavioral Finance can explain the phenomenon of IPO underpricing in China well.And uses the stochastic frontier models to study the IPO underpricing in China.Because of the issuance method in this period, the offer price of IPOs in China before 2005 significantly presented the lower stochastic frontier, which was completely opposite to overseas market. When the book-building mechanism has been adopted since 2005, the upper stochastic frontier characteristic in the pricing of IPOs begins to appear, which is similar with the developed capital market. Then uses the the rate of deviation and explaining variable of investor sentiment and market condition regressing with IPO underpricing. It points that the IPO underpricing in China not only related to the pricing factors in primary market, but also related to the investors sentiment and the market environment factors in the secondary market.