A Empirical Study About Affiliated Mutual Funds Of Underwriters Subscribe New Share And IPO Underpricing

Affiliated mutual funds of underwriters subscribe new shares refers to the financial group what have control power or controlling interest or other incidence relation with underwriters, affiliated mutual funds of the financial group subscribe underwriters underwriting IPO, but these affiliated mutual funds have not direct relationship with underwriters. The new 《Securities Law》 specific provision, IPO underwriters is prohibited to participate in the subscription of new shares, so underwriters only through this kind of indirect purchasing behavior to achieve the purpose that it offerings new shares. As unprecedented development of the market economy and the financial market of Chinese, a large financial group arises at the historic moment, underwriters are able to bypass the law, and indirect holding new shares of IPO companies, the most direct reason is that the existence of financial group. Financial group is the body of the securities market, underwriters through affiliated mutual funds of financial group to participate in the subscription of new shares will affect the IPO market, specific performance is market investors’ subscribe enthusiasm for new shares and IPO underpricing rate. Affiliated mutual funds of underwriters subscribe new shares exists the positive and negative effects for IPO market, due to the maturity and defects of the development of financial market in China, on the one hand, we should give full play to the positive role of financial group to the IPO market, on the other hand, it try to eliminate the negative effects and promote the healthy development of financial market. Based on this, this article divides all IPO to three types, from2006to2011. Analysis the three cases, the relationship between affiliated mutual funds of underwriters subscribe new shares and IPO underpricing and the investors’ subscribed enthusiasm.First of all, the article statistics all IPO from2006to2011, we change some indexes, including every year the number of IPO companies, the annual number of shares and raise money amount, to analysis sales situation of IPO market; meanwhile combined with the Shanghai composite index, the IPO market is divided:the bull market IPO to sell like hot cakes, the bear market IPO to sell like hot cakes and the bear market cold pin IPO. Secondly, respectively for three kinds of cases do descriptive statistics for average the first day returns and situation of investment funds subscribes new shares, to determine the direction of investment; and then we contrast the underwriters investment fund and the investment fund suhscription of new shares, analysis affiliated mutual funds of underwriters of investment focus. Third, the sample should be divided into IPO underwriters to participate in the ownership and no IPO underwriters to participate in ownership, compared two groups, at the same time, we do the T test to underpricing rate of the two groups, to investigate whether affiliated mutual funds have influence for underpricing rate. Finally, regression analysis was carried out on the sample, to determine the overall rationality of sample and the correlation of variables.Through research and analysis, this paper have the following conclusions:First, the bear market unsalable IPOs, underpricing rate is relatively low, and the higher ratio of underwriters subscribed investment funds;Second, the bull market sell like hot cakes’IPOs, underpricing rate is high, the underwriters investment fund subscription ratio is high;Third, other conditions for some cases, price adjustment and the behavior of the subscription of new shares is positive correlation, but the correlation between underwriters investment funds ownership rate is uncertainty;Fourth, underwriter reputation and IPO underpricing rate is not entirely positive correlation.Based on the above conclusions, this paper puts forward the following suggestions: first, strengthen the supervision of IPO issue price setting, make the IPO issue price more in line with the intrinsic value of the stock; second, strict restrictions investment funds to participate in the subscription of new shares, especially associated with the underwriters.Third, reform of the IPO approval system, and makes it more comply with the laws of market development, more in line with the demand of the market,more market-oriented. Fourth, given that the contradiction between the trend of the mixed development of the domestic financial group and supervised respectively, we should speed up to establish financial group mixed supervision mechanism. Fifth, based on the example Rayman’s collapse, to perfect the financial group’s financial statements, strengthen the supervision of combined financial statements. Sixth, to increase financial group’s capital adequacy standards.