Study On The IPO System And Underpricing

The underpricing of Initial Public Offering (IPO) refers to a phenomenon that the new issued shares are at lower offer prices but at higher trading prices in the first issued day and the investors are able to obtain excess return of IPO. Since Reilly and Hatfiedl(1969), Stoll and Curly (1970) found the short-term IPO underpricing phenomenon, the finance research of this underpricing phenomenon has become a Key content and aresearch focus.I believe that regulatory is an important factor of the Chinese IPO underpricing phenomenon that cannot be ignored. Based on the Chinese stock market data, this paper examines Chinese A-share market IPO (IPO) underpricing phenomenon during the period 1990-2015, documents the evolution of regulatory in Chinese A-share market and shows how regulatory changes the affect IPO underpricing in China. This paper examines the influence of the IPO system reform on the degree of IPO underpricing, which is based on the P/E differential and the data of listed companies in the a-share market from 1990 to 2015. Empirical results indicate that there have been some successes in China’s market-oriented reforms of stock issuing and listing system with reduced IPO underpricing as the P/E differential bigger. What’s more, this paper systematically compares the degree of IPO underpricing of Main Board、SME Board and GEM in several intervals divided by IPO reforms. The result shows that the degree of IPO underpricing in the GEM is generally lower than other two, and the underpricing rate of the GEM reached 17.20% in the latest interval, which gradually decreases the gap with foreign mature markets. This paper provides theoretical results to further promote the reform of stock issuance of registration system and speed up the construction of capital market of multiple levels.