Study On IPO Underpricing Phenomenon In China

IPO Underpricing is a widespread phenomenon of global IPO markets. The underpricing on the intial public offering is especially serious in the Chinese capital market. High IPO underpricing makes the price of stock not reflect all the informations of market and also makes the stock market allocation of resources greatly decreased. Therefore, the research of Chinese IPO underpricing phenomenon and the important factors of IPO underpricing has the strong theoretical and practical meanings. From the 1970s, western scholars have made a lot of theoretical and empirical research of IPO underpricing through econometrical models, and advansed a series of theoretical hypothesis, including the asymmetric information theory, the market climate theory and the investing foam theory.This paper reviews the theory and evidence on IPO underpricing. In the field of theory research, this paper use three models to cover the related literatures; in the field of positive research, we summarize the literatures about IPOs in China's A-share Stock Markets from four perspectives. Then it propose the theoretical hypothesis, considering the factor of management quality. This paper uses the Eviews and the sample datas to make the description of statistical and multiple regression analysis. Finally, it makes the tests of the result.Empirical results show that the IPO underpricing is high in the Chinese stock market and the main factors of affecting are management quality, the issue price, the issue P/E rate, the first day of stock exchange rate. According to the results, this paper propose the policy suggestions that it should establish the multi-level regulation system to improve disclosure of information, and it should promote the development of financial market to nurture the rational investors, and it should improve the issue mechanism to reduce the IPO underpricing.