A Study On IPO Under-pricing Phenomenon In China’s Growth Enterprise Market

China’s GEM was established for the purpose to solve the SME’s problem of financing difficulties. The market provides a financing platform for the SMEs. The first batch of28enterprises officially launched in GEM on October30,2009. Now the market has300companies listed after two years of development. However, the GEM is still in its infancy and all aspects of the system is not mature yet. The IPO under-pricing phenomenon happens a lot in the GEM, which causes irrational allocation of resources. The IPO under-pricing phenomenon in the GEM is so heavy that people take attention to it. Therefore, the study of the IPO under-pricing phenomenon is very important, because it will help us enhance the operational efficiency of China’s capital market and improve the working system of China’s stock market.This paper selects300stocks from China’s GEM, which dated from October30,2009to March19,2012. The multiple linear regression is used to study the impact factors of the IPO under-pricing phenomenon. The empirical analysis contains eight variables, which are based on actual operational status of China’s GEM. The empirical results show that China’s GEM market exists a high rate of IPO under-pricing. Five factors are proved to have affections on IPO under-pricing rate, and they are the offer scale, the lottery rate, the rate of underwriting fee operating revenue, the first day turnover and the ROE. The offer scale, the lottery rate and the rate of underwriting fee operating revenue have significant negative relationships with the rate of IPO under-pricing, the first day turnover and the ROE have significant positive relationships with the rate of IPO under-pricing. At the same time the research shows that the PE, the reputation of underwriter and the asset-liability ratio have no significant relationships with the rate of IPO under-pricing. At last, the paper makes some suggestions to reduce the rate of IPO under-pricing, including improving the regulation system of the security market, enhancing the responsibilities of the broker sponsor and nurturing the rational investors.