The Influence Factors Analysis On IPO Abnormal Initial Return And Long Term Performance

IPO underpricing phenomenon exists in almost all capital markets, while Abnormal Initial Return (AIR) in China's stock market is particularly serious. The myth of AIR has been popular in the market all the time. Therefore, the influence factors on AIR and further analysis on IPO long-term performance has practical significance on instruction of IPO pricing and investment.In view of this, the paper starts from existing domestic and foreign review of research on underpricing and long-term performance. Then summarizing on China's A-share IPO market system, as well as an overview of changes in pricing. Fully understand the object of study and summarize the research results of other scholars, the paper adopt 501 A-share companies from 2002 to 2008 for the study sample to analyze IPO AIR under the influence of different factors. In addition, the paper analyzes 1-year long-term performance of the same sample, by use of time series method.Empirical results show that: (1) the AIR of China's securities market is extremely high in recent years, despite the falling trend. And the AIR is significantly influenced by liquidity ratios, listed waiting period, issue price, turnover, price-earnings ratio, issue size and other variables related to. At the same time, AIR is also subject to market fluctuations in a significant level. The results show that AIR in China's stock market is mainly infuenced by regulation and speculation. (2) Performance of new stock in China's stock market remains weak in the Long run. Long-term anormal return of the sample showed a linear downward trend, but not connected with their lagged variables.Finally, based on empirical results the paper conclude that the underpricing rate of China's IPO should include part of underpricing and part of overpricing. And part of overpricing outweighs underpricing. That is different from West theory.