A Testing On The OAO On The Performance Of Hong Kong Stock Issued

OAO(Over-allotment option), is an option that publishers granted the mainunderwriter an option who sell no more than15%shares of selling amount according tothe same issue price, which means the main underwriter sell no more than115%ofthe shares available to investors. Including underwriting part of the stock listed date of30days from the issuance, if the stock price is higher than the issue price, the mainunderwriter may require the issuer to issue no more than the underwritten amount of15%of the stock, then this stock is assigned to the application. If the stock price is lower thanthe issue price, the main underwriter don’t use this option then purchase stocks issuedfrom a centralized auction market.Over-allotment option reduces the risk of stock issuance, increase the amount offinancing to the issuer, and reduce the volatility of the stock market price to the market.Over-allotment option was first widely used in China’s B-share market. But Thismechanism did not be widely used in the A-share market, because China’s A-share IPOunderpricing is significantly higher than a mature foreign capital market, There is no riskfor underwriters to issue new shares. Until2006, the Industrial and Commercial Bank isthe first to use over-allotment option, so, this mechanism is the first application in the Ashare market.This article by empirical test application effect of the over-allotment option on theHong Kong market since2009to2011, verify the mechanism of the effect on thestability of the Hong Kong stock market and pricing efficiency and to analyze whetherthe over-allotment option can play in the A-share market, the theoretical effects.Meanwhile, this paper also describes the disclosure of information and unfair marketbehavior that may arise in this process, and put forward policy recommendations tostrengthen information disclosure and improving the IPO system, improve the supportingmechanism of the over-allotment option.