The Research Of GEM Listed Companies’ IPO Financing Costs

On October30,2009, the growth enterprise market(GEM) was established, with28companies listing in Shenzhen stock exchange. the GEM is very important to the smalland medium-sized enterprises’(SME) long-term sustainable developing, as an importantpart of the securities market.The GEM listed companies are mainly the small and medium-sized enterprises.The SME as the mainstay of national economic development, is very important to theresidents’ employment and the real economy’s development. But due to the SMES havethe feature with small asset size, collateral and big market risk, the SMES have thequestion of financing. The GEM market provides the source of financing to SMES whichis in the mature period of high-tech innovation, promoting the development of SMES. Atthe same time, the investors can share the SMES’ growth. On the other hand, due to theSMES’ capital operation ability is limited, the SMES will consider IPO financing costswhen financing.IPO financing cost includes IPO direct financing costs and IPO indirect financingcosts. IPO financing costs include underwriting sponsor fee, auditing, assessment fee andrelease formalities charge, which should need to pay cash directly. IPO indirect costsinclude the agent cost, institutional rent-seeking cost, asymmetric information cost,opportunity cost and the cost of equity dilution, which do not need to pay cash directly.Base on the research of IPO financing cost, this article selects the GEM listed companiesas the research object, aiming at the IPO financing cost and its influencing factors of theGEM listed companies.Firstly, this article analyzed the present situation of the GEM listed companies: theGEM listing condition between2009to2012, the industry condition of GEM listedcompanies and the area of GEM listed companies.Secondly, the IPO financing costs can be divided into dominant cost and recessivecost. This article analyzed deeply the IPO financing cost from dominant cost an recessivecost. And this article made a descriptive statistical analysis of dominant cost andrecessive cost from the time to market, issuing scale and region for GEM listed companies. The analysis results showed that the IPO direct financing costs increasingyear by year, reducing with the expanding of issuance, the cost of the eastern coastalregion less than the central and western regions, the IPO indirect financing costs reducingyear by year, reducing with the expanding of issuance, the cost of southwest andnorthwest regions higher the other regions.Fourthly, this article uses the principal component analysis method to empiricalresearch the influencing factor of the GEM IPO financing cost. It selects price factor,scale factor, growth ability factor, profit factor and ownership structure factor from thefinancial position, scale, equity structure and distribution characteristics of the fourvariables. Through the regression analysis of these factors to the IPO direct financingcost, the IPO indirect financing cost and the IPO financing cost, and then putting into twovirtual variables of the underwriter reputation and region. The following researchconclusions: the price factor and scale factor are negatively related with IPO directfinancing cost. The price factor,the scale factor, growth ability factor, underwriterreputation, the east and south regions are negatively relater with the IPO indirectfinancing cost. Among them, the price factor includes price, issuance, issued p/e ratio andrisk of information asymmetry. The scale factor includes total assets and net assets. Thegrowth ability factor includes the accounts receivable turnover ratio and the winningratio.Finally, on the basis of the above conclusions, this article gives some proposal from the IPOdirect financing cost and the IPO indirect financing cost to promote the IPO financing costrationalization, hoping to provide some reference for future research and practice of companies’financing costs which listed on the GEM.