Issuing New Shares In The New Inquiry System Reform Performance Test

The reform of the issuance of common stocks has been always the core issue in improving China's capital market. The system of the new shares issue has a great impact on the operation of the primary market as well as on the function of the capital-raising of the stock market. It's very common over the world that the new shares will leave a high return when traded in the stock market on the first day, which is called "under-pricing". The extent of under-pricing of China's new shares is abnormally high. From 2001, the checking system of the IPO has been performed and from 2006, the IPO pricing inquiry system has also been performed. From then on, the extent of under-pricing has been decreased but still very high. In 2008, China's stock market plunged for over a year, which prompted the CSRC to reform the IPO pricing inquiry system. In June 2009, the CSRC make a great reform on the IPO pricing inquiry system again and resumed the issuance of new shares which was paused a year ago. This paper has reviewed the previous process of the reform of IPO. We will assess that whether the new IPO pricing inquiry system has the expected effects on decreasing the IPO under-pricing. We will also discuss which factors made the effects on IPO under-pricing.