An Empirical Study On The Rationality Of IPO Pricing Of Shanghai Security Market

Since 1990, China's stock market has achieved qualitative advance both in depth and width in the context of rapid economy growth and far-reaching reform. As a result, it is playing a more and more important role in the national economy. Usually, firms like to go public instead of private placement,which is called initial public offerings. It is a way of connecting the offering market(first market)and transacting market(second market).But, it is illustrated that Asian countries and American countries even the Europe countries which is the most development countries in the world all exist the under-pricing .It is more obvious in the A stock offering market of our country.We usually use the degree of under-pricing and compare the degree with development market to study the rationality of stock pricing. On the theory view, offering price is a firm's future expected discount value, which is the same to transaction price of the second market. So the stock after initial offering shouldn't be higher or lower than the original avenue rat. But the degree of under-pricing in our stock market is always obvious and much higher than the original degree of development market. It is thought that the IPO price is un-rational in our first stock market. Because the degree of under-pricing is the result of comparing the offering price in the first market with the transaction price in the second price, so we must consider if the price in the second market is rational. If it is rational and effect the firm value, the great degree of under-pricing illustrate the price in the first market is un-rational; but if it is not, it will not be exact by comparing the price to illustrate the rationality. So basing on the former thoughts and considering the fact in our stock market, the paper chooses the topic to study. The paper is based on the corporate financial theory and searches stock prices between 2001 and 2007 as the research data. In the process of researching, I separate the offering price with transacting price to research them in different phrase. By using main component analysis to explain corporate value, we can check the rationality and make some suggestion to the reform in our country's stock market. As a result, since 2001 the offering price can affect the firm value and the result of high un-pricing degree may be the higher price in second market, which is the new conclusion in the new situation.It follows the model of from theory basis to empirical study to practice. The first chapter is instructor to introducing the goal, question and effect. The second chapter as theory basis mainly introduces the existing conclusions and regulars the question scale. The following chapter will introduce research method and be prepared for the empirical study. So it is to the main chapter, which will check the rationality of stock price in Shanghai stock market sine 2001. On the basis of the former analysis, it makes some suggestion to the stock market.