Research On IPO Underpricing In China 's Growth Enterprise Market

IPO underpricing is a worldwide problem, but if the Efficient Markets Hypothesis stands, IPO underpricing problem should not exist, and that’s why people call this problem as “the mystery of IPO”.Growth Enterprises Market officially listed in China in October 30,2009. This is a signal to show the progress of capital market of china. Growth Enterprises Market provides a convenient path for small corporations to get the capital they need to expand their business. The market first listed 28 corporations, now there are over 400 corporations have been listed in it, and the number is still growing.High-tech enterprises are the main part of allthose corporations that have been listed in this market,which provide strong support for the strategy of developing the country through science and technology in china.Growth Enterprises Market of China only developed for a very short time and its’ system is imperfect, so the market faces a plenty of problems, in which the severest one is IPO underpricing. Investors from the primary market realized they can get excess returns from speculation, so they store their money in the primary market. And some corporations seized this chance as a great opportunity to get money from the market, so they just chose to be listed on the market without thinking clearly about the development plan for their own. All of these problems have no advantage for the long-term and stable development of the capital market of China.Academicians from all over the world have been studied on IPO underpricing for a long time, they already developed a complete theoretical system over the problem. But there are differences from different market of the world, so there is no system that can explain the problem for the whole world, and that’s why we need to study on IPO underpricing of Growth Enterprises Market of China based on all of these complete theoretical systems. And we will use data to try to solve the problem.I have summarized mature theories all over the world in this paper, and try to study the IPO underpricing problem of Growth Enterprises Market of China based on the actual situation in China.First, I put forward reasonable assumptions about the GEM IPO underpricing based on mature theories, proposed factors may affect GEM IPO underpricing. Second, I established a model for empirical analysis of the problem. I selected data from the database of CSMAR. The data contains a total of 323 stocks from October 30, 2009 to July 31, 2014 from GEM. The conclusions of this paper is: the issue size, the time interval of issuing and listing, corporate issuance price earnings ratio, the issuance of the proportion of circulating shares and the exchange rate of the new listing on the first day have significant effects to the GEM IPO underpricing, the success rate of purchase shares and the industry of the corporations have no significant influence on GEM IPO underpricing.At the end of the paper, we summarize the conclusions of this research, proposed suggestions for GEM IPO underpricing problem of China.