The Influence Of Auditor's Contractual Material Capital On IPO Underpricing Ratio

The capital market of our country exists the situation of high level IPO underpricing rate for a long time. It reduces the capital allocation efficiency of the market and makes a negative impact on the sustainable and healthy development of national economy. Current research shows that:The positive signals of high quality auditing services which would reduce the information asymmetry can be delivered to the IPO market, to reduce the IPO underpricing rate. For the topic of how to measure the auditing quality scientifically, scholars try to use external indexes such as rankings, shares to measure it, and then research the effect of high quality audit on capital market, but most of them failed to get the reasonable solution.In this paper, we research from the Angle of auditing contract, trying to establish the scientific measuring system of auditing quality. We research on the premise of "transformation" of accounting firm. We use the accounting firm risk funds and total assets to measure the firm's contractual material capital, and use the partner bonus to measure the partner's contractual material capital, choosing the data of IPO A-share listed companies between March 2007 to April 2014, using multiple regression method, to research the relations between contractual material capital and IPO underpricing ratio on the A-share market and its child plate respectively through empirical test, to explore the guarantee effect of auditor's contractual material capital in the capital market. It shows that the behavior of listed companies hiring the auditor with more abundant capital could significantly decrease the rate of IPO underpricing, the guarantee effects of contractual material capital have been recognized by the capital market, the contractual material capital can be used as a reliable measurement of auditing quality. The more contractual material capital the auditors owned, the more they have motivation to fulfill the contract and guarantee the auditing quality, in case of the loss of the guarantee wealth. The results Among them, the guarantee effect of firm's contractual material capital has been fully identified from the market. The complementary relationship of firm's total assets and the risk funds can ensure auditing quality more comprehensively and timely; But partner's contractual material capital only involved the dividends, its guarantee effects were only recognized by the market preliminary, it still need to do some further implement.To my part, we need to enrich the firm's management systems of material capital so that we can improve auditing quality and standardize the auditing market. At the same time, we need to establish the partner's property registration and management system, implying the guarantee effect of the partner's material capital by legislation. The conclusions can offer important policy recommendations on the development of the accountants industry, we can establish the "credit system" of information disclosure and the "classification regulation" mode of accounting firm based on the contractual material capital, and supports the policies of "association for cultivating high quality auditors" and "promote the firm to become bigger and stronger" from China Association of Certified Public Accountants.