Market Interaction Mechanism Research And The Role Of The Ipos Pricing Policy Suggestions

After20years’development, China’s IPO system has been gradually evolving from administrative-control to market-oriented mechanism. But with the deepening of this process, new problems and contradictions presented constantly. The present system are still under controversy.IPO Pricing inquiry system was performed in2005and the IPO system were reformed in2009and2010. These made the Pricing system becoming more market-oriented, representing more information from investors and operating effectively. But, at the same time, the whole securities market appears that IPO Pricing levels rising sharply and the investment returns significantly declining. This dissertation detailed analyzed that, How does the Secondary market affect the level of issuing pricing in the Primary market by its previous returns of investment, the reputation of underwriters, and the industry valuation levels. And how does pricing level in the Primary market affect the return of investment in short and long turn contrarily. We tried to communicate the interaction of the Primary market and the Secondary market, and proved it with regression analysis of market data. We concluded that, the interaction of these tow markets will raise the pricing when the new shares are undervalued, and reduce the pricing when the new shares are overvalued, promote the IPO Pricing connecting to a reasonable valuation standards and fluctuating around it.According to the analysis of this dissertation, there are still some kinds of facts, belonging to institution’s defect and regulation’s failure, which lead the IPO Pricing deviate from its reasonable valuation standards significantly or continually. These factors discourage the equity and the normal return of the market. Therefore the key points of the further reforming lie in defining each member’s responsibility and obligation in the market, improving the reputation of underwriters and the investment efficiency, punishing performance fraud. Gradually, the IPO system will transform the new shares investment from short-term speculative behavior into long-term strategic investment.