Analysis Of The Allocation Efficiency Of China's A-share Market

This paper studies the allocation efficiency of the primary market and the secondary market depending on the functions of the stock market. The research on the allocation efficiency of primary market includes the IPO pricing efficiency and the fund utilization efficiency. This part mainly analyses the relations between financing scale and the IPO initial returns, and the relationship between financing scale, the IPO initial returns and the listed company's financial data. The former results shows that the two variables are negative related, and the result between different industries are various but the flow of funds is reasonable which can meet the national industrial policy as a whole. The latter shows that the relationship between the IPO initial returns and the performance of listed company are with a weak negative correlation. It indicates that the investors' expectations on new share has nothing to do with the listed company's financial performance on IPO first-day. It is also concluded from the empirical results that the fund utilization efficiency is different between underpricing issuing company and overpricing company in the primary market. Among them, the efficiency of capital is relatively high in the underpricing issuing company, while the financing scale has no significant effect on short-term performance growth in overpricing company. Overall, IPO financing can promote the listed company's performance growth, and the fund can flow into the main business. That is, the capital allocation of listed companies is effective in a short time.Then, this paper studies the capital allocation efficiency of the secondary market. By modeling fixed effects, this article researches the relationship between the listed company's performance and its share price gains. The result reveals that ROE and the growth rates of main business incomes are correlated with stock price return, but EPS is negative correlation with it. This illustrates that the performance of listed company can guide rationally the flow of funds in the secondary market. The results also shows the more important elements that affect the stock returns are the Shanghai A-share index returns and interests, which explains the stock returns is strongly influenced by stock market and macroeconomic factors. Finally, this article analyzes the relationship between the stock returns and seasoned equity offerings, which result finds that when stock returns is high, it is more likely to issue new shares. It shows that the allocation efficiency of China's A-share is high in the secondary market.Therefore, to improve the allocation efficiency of China's A-share market, this paper puts forward the following suggestions. First, the financial data disclosed by the listed companies should be closely reviewed to ensure that the financial statement of pre-IPO is true and can reach the listing standards. Second, the marketization of IPO pricing should be strengthened, and a divergent opinion about IPO pricing should be referenced to ensure that the IPO pricing is more balanced and objective. Third, the relevant policy makers should consummate stock market system to create a good investment environment for the participants. At last, with the improving degree of institutional investor participating the IPO pricing inquiry, the valuations made by institutional investor has an important influence on the IPO pricing. As a result, improving the professional quality of the institutional investors has significantly impact on the pricing efficiency of the primary market and the stability of share price of secondary market.