Factorial And Empiric Researches On "Underpricing" Of IPOs In China Stock Market Under Auditoring System

Under-pricing in IPO is one of the abnormal phenomena existing in China and foreign stock markets. Many researchers do lots of theorial and empiric researches on this field. Until recent, main work has been to investigate the influences of publishers'pricing actions. The representation theories are Welch's"Signaling theory"and Rock's"Winner's curse".But China stock market has great differences from foreign stock markets, especially in investors'behavior. In China, investors are less rational than who in foreign. Thereby, in China stock market condition, the main factor of IPO under-pricing is rather investors'non-rational behavior than publishers'pricing actions.Firstly, using Welch's"Signaling model"and research methods ,meanwhile considering the influence of regulation to under–pricing motivation of IPOs, the paper up-rebuilds new model to investigate the relationship between signaling model and market condition, and makes conclusion that publishers have less motivation to price lower in China. Furthermore, the empiric research using Logistic regression indicates"Signaling theory"has less explanation on"under-pricing"of IPO in China. In the meantime,the empiric investigation result indicates Rock's"Winner's curse"has too less explanation on"under-pricing"of IPO in China.Secondly, using Sherman's"model of book-building method in IPO"and research methods ,meanwhile considering that the feedback from informed investors has influences on both the price of IPOs and the expectation of non-informed investors, the paper up-rebuilds new model for book-building of IPO. The paper estimates the optimal number of inquired investors, cost and price of IPOs. The paper finds different result from Sherman's research, compared to fixed-price offering, that book-building can reduce the under-pricing of IPOs remarkably, so book-building may be more efficient.Thirdly, in virtue of behavioral finance theory, the paper investigates investors'non-rational behavior in China, considering the influences of historical factor,ability of cognition,undertakers,institutional investors,speculators and government. The result is that publishers are rather to price higher than under-price in China, so the dominated factor of IPO"under-pricing"is investors'non-rational behavior.Finally, by multi-factors linear model and stepwise regression method, the paper empirically investigates the main factors influence on IPO"under-pricing"in China.