Study On Inquiry System Influence Of IPO Underpricing In China's Security Market

The IPO underpricing was caused by the closing price was dear than the IPO pricing. So the investors can earn the excess profits when the stocks deal on security exchanges in the first day. The IPO underpricing was the signals of security markets efficient to a certain extent. Many studies have shown the IPO underpricing exist in each of security markets in the world. But the extent of the China's IPO underpricing is more notable than other security markets.This paper has reviewed the study on the IPO underpricing by the financial scholars at home and abroad at first.Ⅰintroduced the course of china's IPO issuance reform and the current situation of the inquiry system. AlsoⅠanalyzed the question that we operate the inquiry system and I was focal point of the empirical analysis. This paper attempted to analyze the world's major IPO pricing mechanism for comparison and made suggestions.By request inquiry system empirical analysis,Ⅰfound that the current inquiry system of implementation was not ideal. The IPO underpricing was still notable high and investors speculated in application day. The result of the empirical analysis also showed that the effect of the implementation was better than that after the inquiry system reform. The institution would not make use of their advantage of funds to manipulate stock. The result has show the base factors were increase, it means the investors were more reasonable in IPO market after the system reform. ButⅠfound the speculation in second market was the major factor for IPO underpricing, and by the empirical analysis result from sub-sample, the book building method did not influence the IPO underpricing significant. It means the effect of the inquiry system of implementation should be improved.This paper attempted to compare the world's major IPO pricing mechanism to China's IPO system.Ⅰsuggested that the manage institution should build measurement system for estimate the institutions who involve in preliminary price advisory, and encourage the sponsors to improve their profession skills at first. Also this paper has considered that it will improve the efficient of inquiry system by endowed the principal underwriters with power to allocate stocks and over-allotment option.