Empirical Research On The Phenomenon Of New Shares Break In GEM

New shares’ first-day yield has been a hot topic in the field of capital market. Previous studies have focused on positive first-day yield, namely the underpricing phenomenon explanation. But since2010, new shares break become a common phenomenon, while study of new break phenomena is imperfect, with great hope GEM opened on October30,2009. It met a variety of problems in the early stage of development, such as, the surging price on the first day in public, the price of IPO on the first trading day is below the initial offering price. There are still a large amount of stock whose prices are below the initial offering price. Until May30th,2013,78.59%of all the GEM shares are break. GEM is still on the early stage of development, and it plays a vital role in establish a multi-level capital market. So these problems in the process of its development are very worthy of attention. Considering that, this paper selects new shares break in GEM as the research target.In this paper, Firstly I describe the domestic and foreign research results about the influence factors to the yields of first-day trading; after that, I summarize some common factors of the break enterprises and combine it with the characteristics of the GEM companies in China and other scholars’ research results to analyze what factors may influence on the gem new shares’ yield on first day trading and its mechanism. Then I make an empirical research to provide proofs that indicate factors which can significantly influence the company shares’yield on the first day of trading; Finally, In the conclusion part of this paper, I make reasonable explanations, and put forward opinions for our country on the healthy development of the GEM.Based on the common features of the break enterprises from basic data analysis, I select several variables for multiple linear regression analysis, and the results from regression analysis leading to shares break are as follows:(1) IPO price of GEM shares has significant effects on yields, and the system for issuing new shares derivative a chain transferring profits. The first-day yields is lower if the IPO price is higher, and there is significant negative correlation between them. High price of IPO is an important cause of break. Bubbles of issue prices are the result of all quarters benefit gambling, including issuing companies, underwriters, sponsors and so on.(2) The investors’ sentiment has significant effects on yields on first day of trading, and It is the direct factor causing shares break first day of trading. According to the research results, turnover rate on first day of trading, Price Change Ratio of Compositional Index of Shenzhen Stock Market and industrial factors have significant influence on the return first day of trading, and these factors can reflect or affect investors’ sentiment, so this result suggests that investors behavior is not always rational.(3) the issuing p/e ratio, winner’s ratio, issuing scale, and corporates’ profitability and growth ability, lead underwriters have no significant effect on yield.In the end, considering the factors that can significantly affect shares yield first day of trading, I put forward several suggestions in the respect of the stock issuing and pricing system, investors’ sentiment and issuing companies respectively. I hope this paper can answer investors’ confusion on break and provide theoretical references for the rational investment. What’s more, I wish the results can further reveal the problems existing in the IPO pricing mechanism, and provide theoretical support for new shares break phenomenon.