On IPOs Intial Returns In Chinese A-Shares Market

IPO pricing is one of the most difficult puzzle recognized by the international financial field.Theoretically speaking,the trade prices after going public should reflect intrinsic value of the companies.But as a matter of fact,the IPO public are not always consistent with companies'intrinsic value,the first-day trade prices after IPO sometimes deviate its intrinsic value,leading to the underpricing of IPO.What's more,IPO underpricing is more serious in china,bring about excess returns in the IPO market.Then,what factors influence the establishment of IPO offering prices?Why there is IPO underpricing more serious in china?These are the core issue of the paper.We believe,the majority of explanations for the performance of China's new issue rely upon western traditional theory hypothesis,which,so far,can not make convincing explanations based on specific institutional background and market conditions of China's security market.In fact,China's new issue system are experiencing market-oriented reform and has strong administrative interference.Therefore,there are lack of significance on western traditional theory hypothesis.I think that relation between evolvement of the new issue system and pricing effciency is the present research emphasis.Is distribution system of market-oriented reform successful? Is able to adjust to the current market conditions in our country? Do improve the pricing efficiency? Find the answers to these questions will have important theoretical and practical significance, so as to further market-oriented reform in the future provide a theoretical reference.Since 1993, China issued new shares and Approval system has gone through the approval system and the authorizing system in two phases, the offering price method has undergone a fixed price, a relatively fixed price-earnings ratio, the cumulative bid price, control pricing, price-earnings ratio, market-based pricing in five stages. Distribution systems are also evolving, there has been a variety of new ways.Overall, the entire system of issuing new shares from the planned to market gradually. For the current mechanism for the evolution of China's IPO process, the IPO pricing efficiency really has been improved, now surviving in the academic community there are significant controversy. This will be China's capital market ten years of the evolution of the mechanisms for issuing new shares to make a more comprehensive summary, and the various components of the mechanisms for issuing the first day IPO returns and conducted a descriptive statistics, the last use of Tullock rent-seeking model analysis obtained on the first day of China's shares because of high yield issuance market is not achieved.This paper total includes six chapters, the structure and content of this article is as follows:Chapter 1:Introduction. Statement of research background and the main significance of the IPO to define concepts, research techniques to be adopted routes and research content.Chapter 2:The research literature review. This chapter is a full study of the theoretical basis, mainly from information asymmetry, investor behavior and underwriters conduct a comprehensive and systematic introduction to three aspects of the current domestic and foreign research results of empirical and theoretical hypotheses. Currently many of the research literature, just learn from foreign-based theory of asymmetric information hypothesis, not a good combination of China's special institutional context for research. This leads to the direction of this research.The chapter 3 is the literature review in Chapter 2, based on the Shanghai and Shenzhen through the years between 1993-2009 the company's 1619 IPO-related data on the impact on China's A share IPO on the first day yields an empirical analysis of various factors. The empirical results show that the Western theory of IPO underpricing, the winner curse hypothesis, market sentiment hypothesis, etc. can be IPO of China's A-share market data, empirical support, and also obtained the impact of China's distribution system is the first day IPO returns is an important factor. The commencement of the fourth chapter discusses pave the way done.Chapter 4:China's IPO distribution system and its impact on the evolution of the first day of return rates. This chapter focuses on assessment system from the issuance and distribution and the issuance of three aspects of the pricing system, reviewed the past decade of China's primary market distribution system and the evolution of rate of return on the first day of the impact.Chapter 5:The logic of China's share reform of distribution system.Chapter 6:Research findings, policy recommendations and research prospects. Made to the full text of an overall conclusions and policy recommendations.In short, the main features of this paper are:First, the research sample has large sample of a long cycle.Second, the detailed breakdown of the mechanism of China's IPO during the study period the evolution of a comprehensive display of China's IPO mechanism and the relationship between the yield on the first day.Third, from the perspective of Tullock rent-seeking model is given of why the reform of China's IPO system has repeatedly failed to effectively reduce the rate of return on the first day IPO explanation.