Research On The Underwriter’s Reputation Influence The Underpricing In Initial Public Offerings Under The Inquiry System

By answering the question "weather the inquiry system reform can marketize the initial offerings’ pricing",and according to Information asymmetry theory,the underwriter’s reputation model and implement inquiry system,this paper researched how the underwriter’s reputation influence the initial public offerings,and inspected the results of the ipo system reform.This paper based on the following two theories.First,different participants own different information, the IPO underpricing is the compensation to the investors who lack of information,and the pricing level is positive correlate with the information asymmetry level.The second,investors can get the information from the high reputation underwriters that the new stock’s quality is high,so the under-pricing in IPO is low,and negative correlate with the underwriters’ reoutation. These two theories are widely recognized, and have confirmed by lots of empirical analysis.Based on the two theorise above, this paper summarized the domestic scholar’s view that the administrative interference caused the long-term IPO underprice phenomenon.From the beginning of domestic share market, establish new shares and pricing power has been mastered in supervision department.In the severe administrative intervention, underwriter is difficult to price new stocks independently,the pricing ability is limited and the new pricing is difficult to reflect the underwriters’ reputation capital value.In January2005, the management system implement the ipo marketization reform, launched the inquiry system, the underwriters’ ability of research and search information has been improved.During the later six years,due to various reasons, the new stocks offering has experienced twice pause and restart,and each restart both with more market-oriented reform. This paper assume, after several times of reform,regulators decreases administration and the underwriters ability of independent pricing was improved. So the relation between underwriters’ reputation capital and IPO underpricing also will increase.Based on the above analysis, this paper divided the whole time into three parts,by constructing a multivariate regression model and the differences of comparative analysis method, analysed the relation of IPO underprice and underwriters reputation during each part.The results show that although the IPO system reform reduce the IPO underprice rate, but the reason is increased of new shares supply, not the underwriters reputation capital reduced the level of information asymmetry.The IPO system marketize reform didn’t improve the ability of underwriters price new stocks.The main effect to IPO underprice level sis the investors’ activity in the secondary market.Finally, based on the analysis above,this paper suggested that we should continue the marketize reform,encourage underwriter establishe institutional investors evaluation system, strengthen the supervision on the underwriter, regulate the market order and cultivate mature rectification investors.