The Research About The Effect Of Government Credit On The IPO Market

The credit problem on securities market has been attracted scholar's attention since all the while. The overseas literature mostly discussed the conversion pattern between the individual credit and organize credit and can not bring the government credit into consideration because of the difference of economic system. However, the Chinese particularity lies on: the government credit is too mightiness to exclude folk credit; Moreover, the credibility of state-owned company on society still remains the primacy. Especially in china securities market, the government credibility has been intensified and converted into the government credit by "the governmental indirect guarantee" function of the state-owned assets. Meanwhile, it is more prominent on china securities market that the government provides the indirect guarantee for the state-owned company because of the stock rights separation system in china and the filiation between government and state-owned company. So this paper pins hope on the demonstration which analyzes the effect of government credit on Chinese IPO market.Through the research the author educed two parts of main conclusion: firstly, the IPO price, IPO quantity and collected money scale of state-owned listed company is remarkably higher than nonstate-owned listed company; secondly, the correlativity between the state-owned share proportion and the IPO underpricing is negative. As for the first conclusion, the author's explanation is that the government, especially local government, helped the state-owned listed company to get more money on IPO market with its strong desire because of the filiation between government and state-owned company, so the state-owned assets can get higher IPO price. As for the second conclusion, the author's explanation can be divided into two parts: on the one hand, the more self-identity that investor put on for the value of state-owned assets ,the lower risk agio the investor ask for, so the underpricing of IPO is low. On the other hand, the higher price of state-owned listed company on IPO market, the smaller imaginable roomage for investor. So the underpricing of IPO is low. As a result, the author think that the effect of Government Credit on the IPO market can be divided into two hiberarchies: firstly , "the governmental indirect guarantee" has direct influence on the higher IPO price, IPO quantity and collected money scale that state-owned listed company can get on IPO market. Secondly, the function of governmental indirect guarantee can affect the investor's behavior and expectation on the secondary stock market.Meanwhile, considering the effect of Chinese stock market's different seedtime on the power of governmental indirect guarantee, the author divide the whole swatch into two phases:(1993-1999) the administrative controlled phase,(2000-2004)the market development seedtime and then discussing the phases impact described above on the government credit. The conclusion is: before 2000 the governmental indirect guarantee for state-owned listed company is particularly significant; however, along with the degree of improvement on IPO market, especially after the implementation of the new "Securities Act" (1999), the advantages of governmental indirect guarantee for state-owned listed company gradually disappeared. Moreover, due to the over- guarantee problems caused by government, the degree of state-owned enterprises' credit in the minds of investors is lower.The paper is divided into the following five sections: the first part is the national credit and the governmental indirect guarantee, including using PE and LP model to illustrate the relationship between the governmental indirect guarantee and IPO price and underpricing. The second part is the market conduct analysis under the condition of the governmental indirect guarantee. It emphasized the behavior of investor and the listed state-owned companies. The third part analyzed the distribution system effect on the IPO market, including the introduction of the changes in the distribution and pricing system on china's securities development. The fourth part is the emphasis of this paper which mainly divided into two sections. Nonparametric tests are used to prove the direct impact (IPO price, IPO quantity, collected money scale) caused by government credit and the multiple linear regression method is used to prove the indirect impact (the underpricing of IPO).Moreover, I discussed the different impact on IPO market caused by China's IPO institutional changes. The last part is the overall conclusions and recommendations which mainly focused on the suggestion for the problem of governmental credit through the empirical analysis we discussed above.