Comparatively Study Of IPO Underpricing Of A+H Shares

Looking at the development of global stock market, IPO underpricing exists in stock markets of many countries and regions, and empirical studies showed that IPO underpricing in highly developed markets is lower than that in developing emerging markets. Quite a lot existing studies focused on the source and specific determinant factors of IPO underpricing, trying to control the level of underpricing rate from the root, but there were many differences among these conclusions according to different market environment. Based on the existence of lots of oversea-listing and cross-listing companies, this dissertation comparatively analyses IPO underpricing,source of underpricing and determinant factors of IPO underpriding in both domestic and HongKong securities market according to the method of Stochastic Frontier Analysis, and discusses the problems of issue pricing and market environment in domestic securities market, aiming to put forward the countermeasures to reduce the extremely high underpricing rate.In this dissertation, 23 companies which are listed both on Shanghai securities exchange and HongKong securities exchange from 2000 to 2010 are sampled. First of all, according to the stochastic frontier product model, the existence of deliberate underpricing of A-share and H-share is examined, and the differences of its determinant factors between the two securities markets are also comparatively analyzed. This study concludes that deliberate underpricing exists in both A-share and H-share markets, but pricing efficiency of H-share is higher than A-share; deliberate underpricing of A-share can partially explain the formation of IPO underpricing, but deliberate underpricing of H-share has no relevance with IPO underpricing; pricing of A-share is significantly affected by market sentiment, while pricing of H-share is significantly affected by the value of company.Secondly, according to stochastic frontier cost model, this dissertation comparatively analyses the rationality of initial return of A-share and H-share, efficiency of offering and the differences of its determinant factors between the two securities markets. The result shows that low efficiency exists in A-share market, while new issues are offered with high efficiency in H-share market; initial return of A-share is mostly affected by market sentiment, while initial return of H-share is affected by the combined action of intrinsic value of company,market sentiment and industry type.Looking on the whole, the conclusion is that IPO underpricing of A-share derives from both undervaluation in the primary market and sentiment of investors in the secondary market; while IPO underpricing of H-share derives mainly from composite factors of the secondary market, having no relevance with pricing deviation. Consequently, this dissertation suggests that two aspects should be focused on to control the extremely high underpricing rate in the domestic securities market: actively promoting marketization of stock issue mechanism, and raising the conditions of issuance appropriately to prompt the issue price consisting with the intrinsic value of the company; focusing on the problem of investor sentiment and guiding investors to carry out rational investment.