IPO Pricing Mechanisms And An Empirical Study On Efficiency

In the recent years, (Initial Public Offering) IPO issue continuously gets attention of researchers. This mainly comes from IPO stock three Anomalies : (1) in the IPO stock short-term return or the initial income rate is high (High Initial Returns of IPO);(2)the IPO stock long-term return is lower than the market investment profolio return, ,namely riddle of the IPO long-term Underperformance; (3) the IPO often concentrate in some section of times, in this period, many enterprises go on the market in groups, namely riddle of the IPO selling well (HotIssues).In view of the above IPO domain three Anomalies, scholars have developed many theories for explanation, now domain studies are changed from underpricing phenomenon to mechanism efficiency.In 2005, all the Initial Public Offering, in china should use bookbuilding to determinate stock issue price. After more than year of implementations, it is necessary to examine the efficiency of present system. On the other hand, the existing domestic researches neglect Non tradable stock situation in china, thus would cause biased conclusions.In this dissertation, we use a brand-new research pattern to analyze pricing efficiency .in consideration Non tradable stock situation in china, we select a reasonable evaluation model,using market data to evaluate firm value and direct calculate the theoretical price as benchmark. Comparing difference between theoretical and final price ,explaining factors which determine IPO efficiency.This dissertation includes five chapters.Chapter 1: The concept and mechanism of IPO. Introduce three kinds pricing mechanism: The fixed price mechanism, the auction mechanism and the bookbuilding mechanism. We take stock assignment rule, issue price decision rule, quantity decision rule as dimensions to make comparing study.Chapter 2: This part describing effective IPO mechanism should have some characteristics .pointed out quantity discrimination and investor's participation is vital to let investor provide the private information. In book-building method, the underwriter can control over the allocation of shares. This control right allows the issuer or underwriter to control information costs and thus to control the degree of underpricing. Thus, underpricing in book-building method is lower, in comparison to the other two methods. In words, allocation owned by underwriters greatly reduces the underpircing for IPO. This is the reason book-building is a relatively optimal mechanism among above there basic mechanisms,Chapter3: IPO firm evaluation model select and theoretical price calculation .pointed out that Feltham- Ohlson model establishes direct relationship between earnings and the stock price, evaluating theoretical price easily and accurately by using the market data.Chapter 4: This part of Empirical study divide into two parts, first we have a empirical study on present IPO method in china, different from other research, a brand new view of consideration with Non tradable stock situation in china, The conclusion indicated that the IPO method which implementes now is more efficient than before; second part analyzing factors which determine IPO's efficiency and giving proper explanation.Chapter 5: Research conclusion and policy suggestion. According to the fourth part, At present frameworks of IPO mechanism in China is consistent with international implementation and has played the substantive role. IPO method which implements now is more efficient than before. Finally provide some suggestions to elaborate issue method.Main innovation and contribution of this dissertation lies in the first time using a brand-new research pattern to analyze pricing efficiency .in consideration Non tradable stock situation in china, we select a reasonable evaluation model, using market data to evaluate firm value and direct calculate the theoretical price as benchmark. Get valuable conclusions by comparing difference between theoretic and final price and s explain factors which determine IPO efficiency.