An Empirical Study On IPO Underpricing In Inquiry System

IPO underpricing refers to the situation that the new issue price is lower than the exchange price in the first day. Initial public offerings underpricing, as a very common phenomenon in securities business, is worthy of study, because the over-high IPO underpricing ratio will make negative impact on issuing enterprises, investors as well as the the development of the whole securities business. In some researchers'view, the reasonable underpricing ratio in the mature market should be 20% or so, but the underpricing ratio in china's securities business is remarkably higher than this figure. This thesis, from the perspective of issuing enterprise in the new pricing background, tries to find out the factors influencing IPO underpricing, get conclusions after analyzing such factors and provide suggestions for china's IPO market.Based on the past research and the changes caused by the new pricing model, this thesis takes the following three factors into consideration. They are: the index reflecting investors'psychological factors in the primary inquiry stage, the basic factors of issuing enterprises, and the market factors. Using the regression analysis method in the statistical analysis, this thesis get to the final conclusion: underpricing ratio has negative relation with the issuing factors and psychological factors but has positive relation with market factors. Through analysis, the author finds out that the essential factor causing IPO underpricing is the rigid of the numbers of shares. The over-high IPO underpricing in China has to do with both the unreasonable pricing in IPO market and the investment environment of exchange market. Meanwhile, the author figures out the theory of Hidden limited on price in inquiry, that is the half-open in Inquiry. Currently the primary inquiry is carried out among a limited number of investors, who set up the maximum of pricing, which is considered as the invisible limitation.Lastly, from the perspective of issuing enterprises, this thesis provides IPO with suggestions, which are not only for the issuing models but also for the time of issuing. Concerning the way of issuing models, instead of the game of some investors, we should firstly open the inquiry process and adapt it to the need of market. The author suggests the model of "Dutch auction" combined with the system of "green shoes" to set up pricing so as to make the IPO pricing reasonable and reduce investors' risks. As for the time of issuing, we should grant enterprises more flexibility and let themselves decide the time of issuing and the risk avoidance extent of new issue pricing according to the market environment.