The Theoretical And Empirical Studies On Bookbuilding Mechanism In China

There has long been high abnormal return in the primary stock market of China, attracting a huge sum of capital lingering in the primary market seeking risk free abnormal return. This phenomenon indicates that the primary market of China is inefficient. The inefficiency has led to serious consequence. It not only severely hurts the financing function of China's stock market, decreases the efficiency of resources distribution, aggravates the speculative atmosphere of the primary market, leads to the waste of social resources, but also negatively affects the long term development of the entire stock market. Base on above facts, A series of reforming on the issuance system and issuance ways of stocks have been taken on in China, aiming at improving the IPOs (initial public offerings) issuing marketing and pricing efficiency, The CSRC(China Securities Regulatory Commission) declared《Several Issues Concerning the Trial Implementation of Bookbuilding System for Initial Public Offering of Shares Circular》in 2004.8, and confirm that bookbuilding system will formally begin in china's stock issuance market. Following china electrical international LTD enter the stock market, china's stock market IPOs bookbuilding is completely started in practice stage. Up to 2007 Feb, there are 105 stocks have already issued with the use of bookbuilding system. Under bookbuilding system. How is IPOs issuance efficient, and what facts would decide IPOs pricing. The studies in these field are difficult to find in china. This paper will compare the first IPOs system in some representative countries of the world: bookbuilding system, public offer system, auction system and mixed issuesystem performance. Then review correspond literature with IPOs system studies. Based on those literatures, the"display system"was introduced into IPOs bookbuilding theoretical model. Based on deducing this model, this paper indicates two concepts under book building system: the lowest issuance rate is required to keep, when published company issue stock in IPOs stage: the issuance price certainty will be decided by inside value of company. And the data of the 105 stocks mentioned above have been selected to prove the concept 2. The result of Empirical Study proves the e concept 2 in a certain extent. The elucidative capacity of Empirical model has improved greatly, when taking the closing price into the Empirical model. That indicates the IPOs pricing not only takes the inside factor of the issuance company, i.e. the inside value of the company, but also the external factor of the issuance market. Finally, undergoing the research of china's book building system selling situation in practical, and taking concept 2 with correspond practical instances results into consideration, some methods and advices was given to improve and china's stocks market and book building system.