A Study Of The Effect Of The Underwriters Interest Maximizing Behavior On IPO Overpricing Under Inquiry

Once "IPO undefeated" was the eternal law of the IPO market, but after the2009IPO restarted, this myth was broken again and again. In this context, IPO overpricing phenomenon began to attract academic attention.This thesis try to explain the IPO overpricing phenomenon based on the theory of underwriters’ pursuit of maximizing the benefits. Specifically, this thesis analyzes the effects of the underwriters’ trade-offs behaviors on (1) IPO overpricing;(2) the extent of IPO overpricing based on both the theory and the demonstration. In theory, according to hypothesis of rational man, this paper analyzes how the underwriters’ trade-offs behaviors which is decided after weighing the cost and benefits effect IPO overpricing. In order to investigate (1) IPO overpricing, this essay selects the116IPO shares overpricing on the first day of listing and the116non-IPO overpricing shares as samples. Then on the basis of theoretical analysis, this paper chooses9variables to engage in the following empirical analysis. The results show that:when finally deciding the pricing behavior, the underwriters are concerned about their short-term interest (underwriting fee), the issuers’ effects (IPO issue size), while ignoring their long-term interests (underwriter reputation) and institutional investors’ impact. The trade-offs results will lead underwriter to push the issue price, thereby causing IPO overpricing. In order to study (2) the extent of IPO overpricing, this essay selects the99IPO shares overpricing on the first day of listing as samples and9variables as influence factors. Results are consistent with the study (1), indicating that the empirical results robust.This results show current the IPO pricing market in China is not perfect, there are various problems. Such as underwriters "short-sighted opportunism behavior", issuers and underwriters collusion, absence of reputation mechanism, absence of institutional investors’ constraint functions and so on. Finally, to improve these issues this essay puts forward some suggestions and opinions.