Institutional Environment,Ownership And IPO Underpricing

IPO underpricing is a phenomenon that the price of IPO is significantly lower than the market price of the first trading day,which leads to extremely high return.This paper combines macro environment and micro characteristics of enterprise,and examines three issues which are inclusive or has never been researched.Specifically,this paper researched three issues that haven't been researched or haven't reached to conclusions before in the area of IPO underpricing.The first issue is that whether or not the institutional environment can affect IPO underpricing significantly.This paper uses National Economic Research Institute Index of Marketization(NER?M)to measure the institutional environment,and divides it into the development situation of credit market,law environment and the degree of government intervention.We find that the provinces(autonomous regions,municipalities)with better institutional environment have lower IPO underpricing,in addition,the development situation of credit market,law environment and the degree of government intervention all have significant negative correlation with IPO underpricing.The second issue is that whether or not the ownership of enterprise can have significant effect on IPO underpricing.Firstly,this paper divides enterprise into national enterprise and private enterprise,and finds that the IPO underpricing of national enterprise is significantly higher than that of private enterprise.Then this paper divides national enterprise into central national enterprise and local national enterprise,and finds that the IPO underpricing of central national enterprise is significantly higher than that of local national enterprise.The third issue is that whether or not the institutional environment affects private enterprise,local national enterprise and central national enterprise differently,and finds that a better institutional environment reduces IPO underpricing most for private firms,less for local national enterprise,and least for central national enterprise.In consideration of series of problems caused by high IPO underpricing,for example,the decline of efficiency of resource allocation,unreasonable volatility of stock price and the increase of systemic risk,this paper gives four suggestions based on the research conclusion.First,strengthen the construction of local institutional environment,which is the security of corporate financing.Second,respect for the power of market and reduce political purpose on state-owned enterprise.Third,advance the reform of registration system and promote the healthy development of securities market.Forth,strengthen the construction of information disclosure mechanism and complete the supervisory system.