The Study Of Chinext’s Underpricing Phenomenon

IPO underpricing refers to the IPO price significantly lower than that listed on the first day closing price. There are significant differences between the primary market and the secondary market. The behavior of the issuer is "leave the Money on the table", and the subscriber can obtain excess returns on the first day of listing. IPO underpricing phenomenon was first discovered in the U.S. market since the1980s, then scholars have found national markets this phenomenon. In the Chinese market, much attention from all walks of life has been paid to the phenomenon of IPO underpricing, which is a very serious. The Chinext after10years of brewing, sets sail in September2009. The thesis pays attention to the degree of IPO underpricing in this market and its influencing factors.Our samples consist of258firms that went public on the Chinext between October30,2009and August31,2011.We found that the average level of IPO underpricing is38.25%. In order to explain the high level of underpricing in the Chinext, we sort out the theories of IPO underpricing. Then according to the asymmetric information theory to involve investors, we put forward the hypothesis testing. This paper brings in the media coverage for an indicator which depicts the structure of the investors through the relationship between the media coverage and the IPO underpricing in the market. The conclusions reached by the application of multiple regression meets "the winner’s curse", which can explain the GEM underpricing phenomenon. The conclusions reached by the application of multiple regression meets "the winner’s curse", which can explain underpricing phenomenon of the Chinext. Theses results indicate that there are differences about the information of the issuer which investors possess, to attract the Uninformed investors to participate in purchase the IPO stock, the issuer (or underwriter) depress issue price of new shares. The intensity of media coverage may to some extent incite the limited rational investors, who become the market leading force. In addition, we also found that the fundamental factors don’t significantly explain the underpricing of the Chinext, but the pe and turnover are significant. In another word, the current inquiry mechanism still exist irrationality and the secondary market is in a strong speculative atmosphere.