Empirical Study On Influences On IPO First-Day Price Decline In Chinese Stock Market

IPO pricing is always a core problem, which will influence the outcome of issuance. Since2010, the phenomenon of IPO first-day price decline has swept across entire Chinese stocks market.885stocks got IPO from2009to2012, and among them,144stocks’price declined on the first day. What factors lead to IPO first-day price decline? It is the problem which will be studied in this article.Firstly, this article presents basic theory of IPO pricing, summarizes results of current researches concerning IPO pricing and reviews the evolution of Chinese issuance system. Then, this article takes corporations which went public between the year2009to2012as samples to do empirical research on influences on IPO first-day decline on Main Board, Small and Medium-sized Enterprise Board and Growth Enterprise Market respectively with logistic regression model and linear regression model. The result of empirical analysis shows that: Firstly, a stock with higher issuance PE, higher on-line lot winning rate and lower oversubscription multiple, has higher probability of first-day price decline; and higher issuance PE leads to higher degree of price decline. Secondly, the corporation with higher ROA a year before going public has higher probability and higher degree of first-day price decline. The possible reason of this phenomenon is that the listed issuer might conduct surplus management under the background of transformation of economics system in China. In addition, in the Growth Enterprise Market, a corporate with higher growth capability has less probability of IPO first-day price decline; Growth is negatively related to the degree of IPO first-day price decline. Thirdly, market condition affects the probability of IPO first-day decline significantly:the better the market condition is, the less probability of IPO first-day price fall is; and the phenomenon of IPO first-day price decline has aggregation effect. Fourthly, there is no significant difference among main board, Small and Medium-sized Enterprise Board and Growth Enterprise Market on possibility and degree of IPO first-day price decline. This study explores the influential factors of IPO pricing from the angle of the IPO first-day price fall, enriching the IPO pricing research. The result of this study contributes to establishment a more effective stock issue system by providing theoretical basis and empirical evidence.