An Empirical Study On The Impact Of Investor Sentiment On IPO Underpricing

The growth enterprise market is an important part of multi-level capital market in our country,the "three highs" issue in that market has always been a hot topic of scholars since the market is built in the October 30 th,2009.The positive operation of the IPO market is an important prerequisite for the healthy development of capital market,and the whole market is surrounded by people's serious irrational investment behavior.Investors generally exist psychological characteristics such as "herding,seeking wealth and overconfidence",and they are very vulnerable to the influence of emotions in the process of investment.These irrational behaviors not only lead to imbalance in capital allocation,but also leaving hidden dangers for the the share price of IPO enterprises in the long-term trend.Firstly,this article has carried on the massive literature review to find the answer to these questions,such as the psychological characteristics of the investors,how to measure the investor sentiment,which factors will cause the IPO underpricing,how the investor sentiment affects the IPO underpricing and so on.And then use the principal component analysis to construct the composite investor sentiment index,which can reflect the investor's emotion synthetically.At the same time,under the influence of investor's emotion,we use multivariate regression analysis to test whether the classical IPO underpricing theory is established.Based on investor sentiment hypothesis,Ex-ante uncertainty hypothesis,signaling hypothesis,underwriter reputation hypothesis,investors with tide hypothesis,this paper puts forward seven assumptions.In the empirical analysis part,this paper selects 199 samples after rejecting financial data,financial insurance and ST listed company.Firstly,the descriptive statistical analysis is carried out on the samples.Then,the variables involved in the model are analyzed by the person correlation analysis to prepare for multiple regression analysis.Finally,the multiple regression analysis.Through the empirical get the following conclusion:(1)Investor sentiment and IPO underpricing rate is positive correlation,and the composite index(CICSI index)investor sentiment is negative and smooth from the first half of 2012 to the first half of 2014,and the CICSI index is positive and volatility from the second half of 2014 to the first half of 2015.Considering that the CICSI index and IPO underpricing rate is basically consistent,investor sentiment hypothesis is established.(2)The correlation coefficient between IPO size and IPO underpricing rate is negative but not significant.This shows that there is an obvious speculative atmosphere in the issuance of new shares of China's growth enterprise market.Regardless of the size of issuance,investors will be chasing,and smaller companies issue shares more easily manipulated,so IPO underpricing rate will be relatively higher.Finally,Ex-ante uncertainty hypothesis does not hold.(3)The correlation coefficient between PE ratio,asset-liability ratio,rate of return on Equity and IPO underpricing rate are all negative.From the P E ratio,we find that investors prefer low price stock or low valuation of the stock;From the asset-liability ratio,we find that the investor is not sensitive to asset-liability ratio;From the return on equity,we find that the less profitable companies in order to attract more investors exist excessive packaging and publicity,with the help of a popular theme pushing up share prices.Therefore,the signal hypothesis does not hold.(4)The correlation coefficient between underwriter reputation and IPO underpricing rate is negative but not significant.This shows that some of our immature underwriters on the market in order to accumulate their own reputation,through the rapid implementation of listed companies to improve their visibility,in the process of underwriting there are some lax qualification,mutual collusion and other moral hazard.Therefore,the underwriter reputation hypothesis does not hold.(5)The industry division is inversely related to the IPO underpricing rate.We find that the investor is less inclined to invest in emerging industries due to the presence of herd mentality and lack of confidence in the manufacturing industry.In view of the above conclusions,this paper puts forward some policy Suggestions as follows:First,the investor sentiment should be guide rationally,the establishment of public opinion supervision and dissemination center,the integration of financialinformation dissemination and evaluation of channel resources;Second,to strengthen the education and guidance to investors,the establishment of individual investor associations,the use of mutual learning fund to carry out investor learning activities;Third,establishing a market-oriented brokerage exit mechanism,increasing the pressure of management motivation of brokerage,to optimize the structure of the securities market;Fourth,to strengthen the manufacturing industry transformation and upgrading,improving their own independent innovation,eliminating backward production capacity,promoting the innovation in products and markets,to achieve new economic growth point.