The Research Of Influencing Factor On IPO Under-pricing In China’s Growth Enterprise Market

As the most dynamic economic groups and the development potential in China’s economy, the small and medium-sized enterprises are playing an increasingly important role. At present, our country is in economic transition period, so supporting the development of small and medium-sized enterprises under the new normal has received national attention. But it is well known that due to our country economic system is not perfect, the capital market does not play a substantial role. It’s still a difficult problem for small and medium-sized enterprise to finance. However, the GEM just provides a good platform, so it should be enough valued.After 10 years’ sufficient preparation, the high-profile China’s Growth Enterprise Market(GEM)has finally opened on Oetober30,2009, becoming a milestone in China and even the whole world capital market. As an important part of establishing multi-level capital market system in China,GEM, also called the Second stock Market, is different from the motherboard Market (Main board Market) of securities Market. GEM was set up for the entrepreneurial, new, small and medium-sized enterprises and high-tech industries, for which is difficult to finance in the Main board Market. The GEM enriches the multi-level development of China’s capital market, transform the capital market and promote the growth of small and medium-sized innovative enterprises. It is an important supplement to the Main board Market and plays an important role in China’s capital Market.IPO underpricing phenomenon refers to the initial public offering price obviously lower than the market price of the debut. There is a huge gap between the issuing market and the trading market, leading to the excess return for the new stock. This phenomenon is called "IPO underpricing puzzle" by many scholars at home and abroad. This phenomenon is common and in different degree in the stock market in the developed countries and developing countries. In the developed countries, their capital markets have improved well through the long-term development. The IPO underpricing rate has reached a reasonable level range, generally no more than 20%. However, the development of China’s securities market is not mature, especially for the growth enterprise market. There have been so high in IPO underpricing rate of GEM. For the first 28 companies listed, their IPO underpricing rate is up to 106.2% on average. As we all know, such high underpricing rate is obviously not conducive to the stable and healthy development.Firstly, this paper defines some related concept on the growth enterprise market and the IPO underpricing, and introduces the theories of the GEM IPO underpricing phenomenon of the foreign scholars, mainly including the asymmetric information theory, information theory and behavioral finance theory. Then present development situation of the G IPOin our country is reviewed, including the related systems and the GEM IPO characteristics and some existing problems. Then the paper qualitatively describes the influence factors of the GEM IPO underpricing in China, mainly from three aspects to carry on the analysis, the company fundamentals, the investor’s behavior and the market system, which lay a foundation for the following empirical analysis. In the empirical analysis part, this article selects the sample data from October 30,2009 when the GEM was founded in China to December 30,2014 and selects 10 explanatory variables. Through the establishment of multiple linear regression equation and correcting the results constantly, the paper finally finds out the influence factors of the GEM IPO underpricing rate in our country. The empirical results show that the IPO funds raised is the most significant factors, based on the fundamentals of listed companies. For the market system,the time interval between issuance and listing on the first day and the lead underwriter’s reputation affect the most significantly. In addition, the growth enterprise market in China is in the initial stage of development, in its debut irrational behavior of investors, the rate of turnover and the success rate significantly influence on IPO underpricing. As a result, it’s imminent to reform the distribution systemand guide investors to shift investment philosophy in China.