An Empirical Research On The Reasons Of China's IPO Underpricing

Along with economy development, purely depending on inner fund, business enterprises have already met difficulties in satisfying the fund demand coming from technique progress and seale economy, so issuing to raise money have already become very important in the management and policy-making of modern business enterprises. The research objects of this paper are enterprises' financing efficiency, financing environment, influencing factors and function mechanism and wc use A stock market's IPO (initial public offering) underpricing~2 to measure.The structure of this paper is that firstly, researching the enterprises' financing efficiency and financing environment, secondly thoroughly researching the influencing factors and function mechanism.In the aspects of financing efficiency and financing environment, the conclude is that the market is still immature currently and has the dual market characteristics of "rising and shunt". During the period of equity division, the average IPO underpricing is 122.95 percent; during the period of full circulation, there is some improvement, but the average IPO undcrpricing is still as high as 95.59 percent, so it is still necd further improving.In the aspects of studying the financing efficiency, financing environment, equal to influencing factors of IPO undcrpricing, this paper has a rigorous logic. Firstly we analyze from the theory aspect. Combining the characteristics of "rising and shunt", creatively comprehensivly considerating the two markets, this paper thoroughly research the influencing factors of IPO underpricing from the sides of system, equity structure, equity division, speculation and etc. This paper has improved the poor explaination of our country's IPO underpricing, which is coused by other papers simply setting the mature market's influencing factors to our country.After rigorous theory analysis, this paper, using the 1058 IPOs data from 1996, 1 to 2007, 4, makes an empirical research of the influencing factors of IPO underpricing with thirty-eight independent variables in four aspects.This paper also has taken the lead in empirically researching the financing efficiency, financing environment, characteristics, influencing factors and changes in the period of full circulation.The paper has analyzed not only the influencing factors, but also the function mechanism, that these factors influence the IPO underpricing by closing price or issuing price. For this purpuse, we study the influencing factors by econometic model and study the function mechanism by description statistics. So, this paper has been beyond the superficial analyse in other papers.In the aspect of econometric model, aiming at sufficiently excavating information from the data, we arrange the data by trade time of new shares. Considering the characteristics of financial data, this paper has creatively adopted asymmetry ARCH-GARCH model with ARMA items, which can removing the influence from autoregressive conditional heteroscedasticity and high rank autorelation. So, this paper's model has an advantage over other papers'.Through rigorous theory and empirical analyze, the paper concludes the reasons of our country's IPO underpricing are different from the reasonable low issuing price in mature markets. The reasons of our country's are the lack of stock supply elasticity, low pricing effficiency, low issuing efficiency; the lack of investment value caused by extreme equity structure and equity division; speculation caused by big dealers and small shareholders. In these reasons, extreme equity structure and equity division are root factors, which influence the system constitution and they are the root reasons of deadly speculation and exorbitant IPO underpricing; the system which is out of the conflict between financing purpose and the lack of investment value has provided living space for speculation; the deadly speculation passes the bubble in the secondary market to the IPO closing price and underpricing. The paper figures that the deadly speculation in the secondary market plays an more important role in the IPO underpdcing than the low pricing and it is the most important factor. The deadly speculation does harm to the value-investment idea. and the development of the financing market.Other innovations:1. The system reform is advantageous to improve market's configuring efficiency, raise the issuing price, restrain speculation and reduce IPO underpricing;2. The supply falls short of demand in our country's stock market. The issue methods without reducing fund have more speculation, higher closing price and IPO underpdcing; The issue methods already reduced fund have less speculation, which can restrain the closing price and IPO underpricing in a certain extent;3. The book-building issue method can improve the issuing price and reduce the IPO underpricing significantly;4. Different from other papers, this paper has proved equity structure affects IPO underpricing. In the aspect of financing efficiency, the new shares with higher institutional share ratio, circulation share ratio have higher issuing price and the new shares with higher state-owned share ratio have lower issuing price. Before the period of full circulation, the relation between equity structure and IPO underpricing is like the shape of reverse"V", which means new shares with balance equity structure of state-owned share ratio, institutional share ratio and circulation share ratio have higher IPO underpricing; both of foreign institutional share ratio and management share ratio have good speculation theme and higher IPO underpricing;5. Industies with faster developing speed have better speculation theme and higher IPO underpricing, but issuing price is the restrictive factor;6. The asymmetry item in the general model proves that the high IPO underpricing is maintained by the serious bubble, high risk in the secondary market, the lack of investment channels and the"new shares' myth";7. In the period of full circulation, the beneficial factors such as the benefit unification between the shareholders of non-tradable shares and the shareholders of tradable shares, practice of book-building issuing method, and etc. can improve the configure effficiency, issuing price and reduce IPO underpricing; In the period of full circulation, the market changes faster; big dealers pay much more attention to risk control in advance, and there are stronger speculation hidden behind the decreasing IPO underpricing;8. In the period of full circulation, there is some Change in the relationship between equity structure and IPO underpricing. With the new factors caused by full circulation, such as stock reduction, speculation before stock reduction, merge and acquisition and new big dealers, the relationship between state-owned share ratio, institutional share ratio and IPO underpricing is like the shape "V"; the relationship between circulation share ratio and IPO underpricing is like the shape reverse "V", which means proper circulation share ratio is the premise of speculation; there is no big change in other aspects;9. In the period of full circulation, the change of the asymmetry item in ARCH-GARCH model means the fluctuation of IPO underpricing has increased.This paper has certain theory and practice meanings in financing market's development, enterprises'share configuration, performance improvement and financing efficiency improvement.