An Empirical Study On IPO Under Pricing Of Pharmaceutical Manufacturing

Since the pharmaceutical industry is an important part of our national economy,it combines traditional industries with modern industries, and treat the first, thesecond, the third industry as one of the industries. It plays a very important role onmany aspects, such as protecting people’s health, promoting quality of life, disasterprevention, military readiness, promoting economic development and socialprogress. The past30years, the development of China ’s pharmaceutical industryshows strong momentum, with an average annual growth rate of more than19%,higher than the average annual growth rate of China’s gross national product andother industries during the same period, and has become one of the fastest growingindustries. By2020, China’s pharmaceutical market will surpass Japan to becomethe world’s second largest pharmaceutical market; the pharmaceutical industry willbecome a pillar industry and leading industries of Chinese high-tech fields and thecountry’s economy. In recent years, the CPC Central Committee and the governmenthave treat the development of the pharmaceutical industry as a strategicdevelopment priorities, frequently instructed its development and provided strongpolicy support for the development of the pharmaceutical industry. Generallyspeaking, China’s pharmaceutical industry ushered in a new round of majoropportunity of rapid development. However, the current study about IPO ofpharmaceutical industry is lacked, which limits the future development of thepharmaceutical industry’s stock market, but also affects the Chinese stock marketfuture development.Firstly, this paper introduces the definition of IPO under pricing, and thenanalyzes the theoretical basis of under pricing of IPOs in which there are four maintheories that asymmetric information theory, behavioral finance theory, systemtheory and equity issuance control theory. Then we compare China’s pharmaceuticalmanufacturing and other industries on IPO, after comparison, the earnings release,the issue price and the first day of the pharmaceutical industry’s turnover is higherthan other industries, secondly on IPO case of the different sections of thepharmaceutical market medicine Industry for comparison; then the IPO case ofsecondary pharmaceutical manufacturing industry classification for comparison; then we made a comparative analysis of pre-IPO different market segments andsecondary industry classification for pharmaceutical manufacturing growth. The last,we elaborate IPO under pricing measure index, noting that we use the initial rate ofreturn of IPO first day of to measure the IPO under pricing situation characterizes ofthe pharmaceutical industry and analyze the reasons.On the basis of these studies, the paper selects115pharmaceuticalmanufacturing stocks as samples from January1,1996to December31,2012, anddetermines the initial rate of return of the IPO under pricing as independentvariables,11factors of IPO under pricing as the dependent variable, maintains thetheoretical model and conducts empirical analysis. in the course of the study, thepaper used the descriptive statistics, correlation analysis and multiple linearregression analysis,we see the average of the initial rate of return of IPO aboutChinese medicine industry is up to91.67%, there is a very high under pricing. Aftertesting and analysis, we also see six explanatory variables can effectively explainIPO underpricing of pharmaceutical manufacturing, such as time interval, lottery,the total funds, share issuance costs, the first day turnover and the return rate of thefirst day. Based on the empirical analysis results, the paper make some relevantpolicy recommendations for the IPO aspects of pharmaceutical manufacturing.