System,Main Bodies' Behavior And IPO Underpricing

IPO (Initial Public Offering) underpricing refers to the phenomenon that the closing price of the new shares listed on the first day is higher than its issuing price. It is widespread on global stock markets.The average level of IPO underpricing in mature capital market is generally below 30%. But in Chinese A-share market, the average level is 152.90%, which is much higher than others'. In general, high IPO underpricing rate and frequent fluctuations are not conducive to the development of the market. To change the situation, we have to start from exploring the cause of it.This paper explains IPO underpricing phenomenon and the change of it from the perspective of the main bodies'behavior. These main bodies include:the government, issuers, intermediaries (mainly refers to the underwriters), and investors (including the primary market and secondary market investors). Among them, the government behavior is a common thread.Firstly, this paper divides the sample into several stages according to the different system in different stages, and discusses the causes of IPO underpricing phenomenon in each stage from the perspective of main bodies'behavior. Then, it mixes the stages together to discuss the causes of IPO underpricing phenomenon generally. There, the factors represent systems will become virtual variables which are included in the analysis model. Finally, the author will combine the empirical analysis results, and make a comprehensive analysis of Chinese A-share market's IPO underpricing phenomenon, then, make some suggestions.In the empirical analysis part, this paper chooses all companies that listed in either Shanghai or Shenzhen market between January 1991 and December 2015 as samples. There are 13 explain factors and 3 control variables in the regression model, the final result shows that:Irrational behavior of investors and the government's system reform have been the most important factors influencing the IPO underpricing in China. Meanwhile, the behaviors of the new shares issuers and the underwriters also affect the rate of IPO underpricing to a certain extent.