Research On China's Stock Market IPO Underpricing Based On Asymmetric Information Theory

IPO infers to the Initial Public Offerings of new shares. This involves the company of sending shares, underwriters, investors, the management and other stakeholders. In the IPO process, the moral hazard and adverse selection problem arising from the information asymmetry between them will necessarily be resolved by the market. This makes the research of IPO market pricing behavior to be the hot spots. And one of the most concerns is the "IPO underpricing", namely, the price of shares is often traded below the closing price of the first day. High level of IPO underpricing has become a constraint to the healthy development of China's stock market. The research to IPO underpricing in China's stock market is not only conducive to the reasonableness of the pricing of new shares, help improve the supervision to new shares release and transaction, but also help investors to select the objects and investment opportunities correctly.In this context, this paper put forward a number of assumptions from the compensation level of the publisher to those who do not have much more information and the response of investors to information. Then it made an empirical test by selecting variables based on the assumption of asymmetric information relevant indicators as an alternative variable. This paper used multivariate regression analysis. And the sample involved 264 new initial public offering shares listing in Shanghai and Shenzhen Stock Exchange from 6, 2006 to 9, 2008. Based on the theoretical analysis, this paper analyzed information asymmetry of the IPO market, pointed out asymmetric information problem existing in the IPO market, and pointed out the impact on IPO trading. Then we presented an analysis model, and carried on the empirical analysis. At last we got the Empirical conclusion, the information asymmetry factors affecting underpricing rate are different.After the above theoretical analysis and empirical analysis, this paper has carried on the summary to this article, and proposes some reasonable policy suggestions which consummates our stock market constructs.