An Empirical Study On The Impact Of IPO Restricted Shares On Stock Price

IPO,as an important means of direct financing for enterprises,plays an important role in the enterprises’collecting capital smoothly, improving management and administration, etc.In the process of IPO, to strike an balance the interests of market principal sectors involved,a restricted stock trade period from one to three years would be adopted to a part of the IPO initial share.Due to the large amount and concentration of this part of restricted stock, what its influence to share prices is like when desterilization is a question that the governors and investors especially pay attention to.This essay adopts the event-study method and makes an analysis to192listed companies in china stock market (from June,2007to September,2009) after new from the old. In total,215times of IPO restricted stocks in desterilization are taken as the sample.By choosing the window phase before and after desterilization (-50,90) as the observation period, balance account and summary are made to the accumulated yield advantage during the observation period. It is found that during the period of (-6,9), the share-price-effect of the IPO restricted stock when desterilization is somewhat evident. Thus,(-6,9) is chosen as the event window and eight different variable indexes are chosen as well. All these215events fall into Low, Middle and High group according to different standards.A comparison on the accumulated yield advantage is made to the variables in each group. And the influence of different groups’ variables on stock prices before and after desterilization is found,too. In the meantime, a significance analysis about the effect of stock price in different phases:(-6,-1) and (1,9) of desterilization, taken the very day of desterilization as the boundary. It turns out that:before desterilization, negative share-price-effect is presented and positive share-price-effect after it. During the entire (-6,9) event phase, negative share-price-effect is presented. Then the conclusion above is demonstrated by making an analysis through establishing the multivariable linear regression model.The results of regression analysis prove the conclusion from the event study:IPO restricted stock trade’s desterilization has an evident linear relation with price-to-equity,market quotation and shareholders’ profitability.But that with return on equity and increase since listing is not so evident. This demonstrates that although corporate performance would influence the level of share prices, the influence on corporate share prices’ highs and lows is not so evident.In the end of this essay, based on the results of demonstrative study and analysis of the influence on the share prices by IPO restricted stock’s desterilization, in combination with the status quo of China’s stock market, reasonable strategies and suggestions on the problems’ solution and management caused by restricted stock’s desterilization are put forward.