The Research On IPO Pricing And Underpricing Based On Social Comparison Theory In China

IPO means initial public offerings. Pricing is the most basic and important aspectin the IPO process. The issue price is reasonable or not will be directly related to thestock’s market performance. Both in mature stock markets and in the immature stockmarket, IPO underpricing is a common phenomenon. The existence of the IPOunderpricing is caused by objective reasons, so a certain degree of underpricing isunderstandable. However, the degree of IPO underpricing is much higher than thenormal, and the high IPO underpricing will bring a significant adverse impact to thestock market’s prosperity and the national economic development.Scholars from various countries have done a lot of theoretical and empiricalresearch on IPO underpricing phenomenon. These studies are mostly from theperspective of information economics or behavioral finance, and all make a differentinterpretation of IPO underpricing phenomenon. However, the current study of thisphenomenon can not make transparent analytic Therefore, the introduction of the newtheory to explain the IPO underpricing phenomenon becomes necessary.Unlike previous studies, this paper analysis the reason for the existence of China’sIPO underpricing from the perspective of social comparison theory, and proves t hefeasibility of using social comparison theory to explain the IPO underpricing ofShanghai A-share market. This not only provides a new research method for the IPOunderpricing in domestic stock market, but also provides a new research idea for otherissues in the domestic stock market. At the same time, this study can help to understandwhether the IPO pricing is reasonable, and provide some references for the formulationof the IPO price.In this paper, analysis, research and interpretation on IPO pricing and underpricingmainly use social comparison theory. Based on the above theoretical analysis, a linearregression model is builded in this paper, and by using stepwise regression analysismethod, effective variables and correlation coefficients are getted. The feasibility andapplicability of social comparison theory in the interpretation of IPO underpricingphenomenon are proved.