The Influence Of Ownership Characteristics On IPO Underpricing

Initial public offering refers to the issuer sold the stock to non-specific investors in order to raise capital on the security market. However, there is a kind of phenomenon which the price of the secondary market is higher than the issue price and it is called IPO underpricing. Thus, the difference between the issue price and the price of the secondary market is enormous and it brings the investors who successfully purchase the stock abnormal return.A large number of studies from domestic and abroad indicate that IPO underpricing in developed capital market is lower than in developing country. Considered that security market in our country has just started and it has grown for only decades, thus the phenomenon of IPO underpricing is more obvious than developed countries. However, the cause of IPO underpricing is different in every country which attracts the scholars to devote them to explore the cause of the IPO underpricing. So far, there are many theories which can explain the phenomenon of the IPO underpricing. Such as Asymmetric information theory, control theory and behavioral finance theory which are widely used. And they explain the phenomenon from different aspects. But so far, the theorists haven’t reached a unanimous conclusion. Thus, we believe research on IPO underpricing is still worth exploring.Considered the nature of different industries and we know our government has strongly supported the cultural industries, thus we choose the cultural industries as study samples. Besides, our country’s capital market was originally established to introduce the joint-stock enterprise and provide a platform for the restructuring of state-owned enterprises. Based on an extensive literature study, this article will focus on how the enterprise’s equity characteristics influence the IPO underpricing. We will establish model from the two aspects which have been stated before to explain this phenomenon.Firstly, we will start from the development of China’s cultural industry. Then describe the equity structure and characteristic of the cultural industries. Also, we will present the general situation of the cultural industries’IPO before and after the equity division reform. Afterwards, we will propose the hypothesis based on the theories analysis.We choose the cultural enterprise which IPO during2007and2012as sample. We select the largest shareholder’s stock ratio and the ratio of the second to the tenth largest shareholding to the first shareholder’s ratio which presents the equity structure as explanatory variables. Then we construct multiple regression models to explain IPO underpricing. Besides, we also select the state-owned share stake, whether state-owned enterprises and the central state-owned enterprises which presents the equity characteristic as explanatory variables.Besides, we add the previous year’s ROE of IPO, the company age, the issue size, the issue price, the debut price-earnings ratio and the success rate on net as control variables to regression model.The empirical results show that both the proportion of the largest shareholder and the second to the tenth largest shareholder is significantly negatively correlated to the IPO underpricing. The state-owned shares are positively related to the IPO underpricing while the central state-owned enterprise is opposite. For other variables, the previous year’s ROE of IPO, the company age, the debut price-earnings ratio are significantly positively correlated to the IPO underpricing. However, the issue size, the issue price, and the success rate on net are significantly negatively correlated to the IPO underpricing.Finally, we reach the conclusion that equity structure and the equity characteristic have influence on IPO underpricing. Besides, we propose suggestions from strengthening the national laws, improving market supervision, promoting the investors to make rational decisions and to optimize the company’s equity structure.