Can Working Experience Of Sponsor Representative Help Effectively Reducing IPO Underpricing?

IPO underpricing generally exists in the capital markets all around the world. As an emerging and transitional capital market, China’s IPO underpricing rate has remained at a very high level, which is much higher than the average level of other countries. For improving the quality of information disclosure, reducing information asymmetry of securities market, and improving the accuracy of the IPO pricing, China began formal sponsor system since2004February.In10years’implementation, many scholars have studied this system. But previous literature mainly focus the research on the sponsor agency, which is one of subjects of sponsor system. This paper research from the perspective of sponsor representative, which is another subject of sponsor system. The sponsor representative plays a very important role in the transmission and certification in the process of IPO and it is an independent information intermediary. We want to research whether their rich working experience can improve the efficiency of IPO pricing.Based on1033IPO projects in Shanghai and Shenzhen stock markets during2006-2012, we analyzed the relationship between working experience of sponsor representative and IPO underpricing, and whether the market environment and the reputation of the sponsor agency affects this relation, and how working experience of sponsor representative affects IPO underpricing. This study find:(1) The relevant working experience of sponsor representative can improve their work efficiency, significantly reduce the rate of IPO underpricing;(2)Market environment will impact this relationship, in the bull market, the relation between working experience of sponsor representative and IPO underpricing will be strengthened;(3)This relationship is not affected by the reputation of sponsor agency;(4)The difference of two sponsor representative’s working experience is greater, the lower the rate of IPO underpricing;(5)The sponsor representative’s education and gender have no significant effect on IPO underpricing;(6)The sponsor representative’s working experience is significantly negatively correlated with earnings management, which demonstrates that an experienced sponsor representative can improve financial information quality of listed company, reduce the information asymmetry and IPO underpricing. This paper is the first research from the perspective of sponsor representative studying IPO underpricing rate, and provide new evidence of IPO underpricing’s influencing factors, and have an important guiding significance for CSRC to strengthen the management of sponsor representative.This paper is divided into six chapters. Chapter1is Introduction. This chapter introduces the paper’s research background, content and significance. Chapter2is Literature Review. This chapter summaries academic achievements of IPO underpricing and the relationship between working experience and performance. Chapter3is Institutional Background, briefly introduces the origin of the sponsor system and operation results in China. Chapter4is Research Design. This chapter includes the research hypotheses, data source, variable definition and empirical model. Chapter5is Empirical Research. Chapter6is Conclusion.