Empirical Research Of IPO Underpricing In China’s Growth Enterprise Board

Compared to China’s main board and small board markets and mature foreignsecurities markets, China’s Growth Enterprise Board established for a short time withsmall market size, narrow growth space and lower operational stability, its ability toagainst market risk and industry risk is relatively weak, these characteristics determinethat it is of high risks and uncertainties, and thus has great impacts on GEM IPO stockprices,resulting the GEM IPO underpricing phenomenon.In order to find reasonable explanations on GEM’s IPO underpricing, we need to dosome systematic analysis and research on the relationship between issue price andclosing price, market participants’ decision-making factors,market condition factors andsome other factors. Many scholars have been trying to set up different assumptions andmodels to find the real reason of IPO underpricing, but so far no theory can be dominantin the field, the study of IPO underpricing is still the focus issue of financial fields.In this paper, we establish China’s GEM IPO underpricing multi-factor model,basedon the traditional finance and behavioral finance, not only focus on the issue marketfactors, but also take into account the speculative reasons in circulation market whichmay lead to the overestimation of IPO shares trading price, to examine the impact of it’sGrowth Enterprise Market IPO underpricing factors systematically.Empirical analyses show that China’s stock market myth does exist,IPOunderpricing degree differs in different years, different industries and release batches,but almost all the GEM stocks exist the first day excess returns. Shares listed on the firstday with high turnover rate indicates that China’s stock market is flooded with short-termprofit-seeking, secondary market investors,speculation is the main reason for the GEMIPO underpricing.