| IPO underpricing is a common problem in new stock markets all over the world, and so far it is still a hot issue in Finance area. However, the rate of Chinese IPO underpricing in A-share Stock market is higher than any other countries, which reflecting the irrational allocation of resources and market inefficiency.This paper use a method which is a combination of normative analysis and empirical analysis, and based on the professional theories and related literature from all scholars, while collecting the data of IPOs in A-Share Stock market from April 2005 to 31 December 2010,and then create a model by nine selected variables. The empirical results show that the rate of IPO underpricing reduces significantly after the stock market reform, the average rate of IPO underpricing is 91.37% from 2006 to 2010, which reduced close to 25 percent compared to 2001 to 2005, the conclusion is powerful affirmed the achievements of stock market reform, but it still reveals that the IPO underpricing rate of Chinese A-Share Stock market is the highest in the world. Meanwhile, the empirical results also get the relationship between the variables and IPO underpricing:the Size, the Price and the Lottery are negatively related to IPO underpricing, and the first volatility, the Turnover, the P/E(Price to Earnings ratio) and the Waitings are positively related to IPO underpricing.Through an in-depth analysis of the above results, we know that the phenomenon of IPO underpricing exists in China after the share reform. And the main factors which explain the issue includes the Price, the Turnover, the P/E and the Lottery, etc. The conclusion shows that the most important reason of IPO underpricing is the weakness of Chinese A-share Stock market and the investors'poor idea.Finally, the author make some conclusions and suggestions as follow:we should create an rational investment market and balance the stock market, at the same time, we should enhance investors'education and so on. |
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