Research On A-Share IPO Pricing Mechanism Of China

The initial public offerings (IPO) pricing mechanism of A share is the key point and difficulty of capital market theoretical research. This article is based on the study of IPO pricing mechanism, depended on game theory, analysis the issuer motivate purpose, investors'purpose, the underwriter's preferences, and the government regulation. This article explores the IPO's supply and demand, the valuation of IPO price which effect on A-share market. The motive of issuers for supply of IPO A-shares has double efficacy. The purpose of investors for IPO's demand is more than the supply of IPO, and this condition will continue for a long time. The underwriters prefer a low price, because their purpose is to ensure regular investors have profit space. Through analyzing the factors of A share IPO pricing mechanism, this article finds problems which need to be solved. For example, the government is lack of effective regulation for the underwriters. There are excessive different between the price of primary market and the secondary market. The market has malignant rent-seeking. In order to solve these problems, a series of corresponding measures must be taken in order to regulate the underwriters, improve the quality of underwriter. Through market competition, it can fully reflect the service quality and reputation capital value of underwriting services. It can be rewarded from reputation investment and improving service quality. In order to make corporate governance structure effect, avoid the moral risk and profit behavior of underwriters, we can take diversified ownership decentralization, reform and optimize the property rights system. If these measures are taken, the pricing mechanism of IPO would reflect the need of market.