Will CSRC Punish Sponsor If It Has Not Being Diligence In IPOs

Since the establishment of China’s capital market, the ipo system has gone through approval, investment bank and now sponsor system. The evolution of ipo system gradually clarified the position and responsibilities of issuers and intermediaries in the capital market. However, the progress of the ipo system does not change the frequently occurring phenomenon of decline in performance of IPOs. The deterioration not only threatens stable development of capital market, but also injures the interests of small shareholders. Under this market condition, CSRC has to do sth. to better issuers’ and sponsors’ behavior.Since sponsor takes the main intermediary responsibility of IPOs, CSRC has issued some statutory rules to regulate sponsor behavior. This paper tries to study whether CSRC punishes sponsor when it has being diligence or not, and if CSRC does, what kind of punishment does it take. Then two hypotheses are proposed: CSRC punishes sponsor if it is irresponsible, and CSRC designates stricter issuance examination committees to review irresponsible sponsor’s follow-sponsored companies.To test these hypotheses, this paper chooses IPOs from 2005 to 2010 and sponsors from 2005 to 2011 as study sample, and uses analysis tools of descriptive analysis and regression analysis. In this paper, the addition to the sponsor’s issuing revenue, issuing amount and fundraise is defined as a measure of whether the punishment is carried out; the passrates of issuance examination committees in last year’s initial public reviews are defined as substitution variables of stricter issuance examination committees. Establish a dummy to define the quality of work of sponsors each year and then set the dummy as 1 when it’s hard working; otherwise 0.Empirical results affirmed the foregoing hypotheses that CSRC does punish irresponsible sponsors through narrowing its revenue, amount and business size. And CSRC takes a more stringent regulation attitude to irresponsible sponsor by designating issuance examination committees with lower issuance passrates.Due to time-limited IPOs and number-limited sponsors, it is still insufficient to measure the supervision of the sponsor’s. It may become more explanatory when taking more sample in follow-up studies. In addition, using committees’passrates to: represent commission discretion in IPO review process is an innovation in researches in the field of securities regulation, so follow-up studies may further policy research and prospect on this basis.