Regional Financial Development,relationship-specific Transaction And IPO's Abnormal Initial Return

IPO's abnormal initial return(AIR)has been called a secret of IPO since it was found for the first time in 1975.IPO's abnormal initial return in China`s market is higher than foreign market`s.This phenomenon has been studied by Chinese scholars in the middle and late 1990 s,and quite a lot of experience results have been achieved.However,most of the researches focus on the financial indicators,distribution mechanism,institutional background and the behavior of investors,underwriters,for some non financial indicators is rarely concerned such as: the relationship-specific transaction.Relationship-specific transaction just like a two edged sword.In today's increasingly competitive market,as the upstream and downstream enterprises in the supply chain,the main supplier or customer plays a key role in alleviating the financing constraints,reducing transaction costs,creating value and maintaining a strong long-term competitive advantage.However,while bringing benefits to the enterprise,relationship-specific transaction also causes the enterprise profit space to be eroded,reduces the transparency of the company,increases the degree of earnings management and so on.As we all known,these researches are based on the studies of the relationship-specific transaction which appears after the listing.As first appeared in public relation transaction information,the main suppliers' or customers' information which appears in the prospectus has not yet been researched by any scholars in China.Whether the pre-ipo relationship-specific transaction also has two sides ? Whether The close degree of the pre-ipo relationship-specific transaction is the influnence factor of IPO's abnormal initial return? Since the reform and opening up,the speed of China's economic development is unbalanced in various provinces.And this characteristic of financial industry presents not only at the level of development,but also in the development of speed.Whether the heterogeneity of the financial regional development will affect pre-ipo relationship-specific transaction and the relationship betweent pre-ipo relationship-specific transaction and IPO's abnormal initial return?As an important entry point,IPO provides an ideal laboratory for the study of these problems.Based on the above considerations,in this paper,we use the Shanghai and Shenzhen A shares 2004-2014 shares as the research sample,and the supplier/customer relationship transactions' data which provided in the IPO Corporations' prospectus as a starting point to investigate the relationship-specifictransactions,regional financial development and their interaction how to affect IPO's abnormal initial return.The empirical results show that IPO Corporations with larger proportion of relationship-specific transactions will have a higher IPO's abnormal initial returns.Further,we find that the improvement of regional financial development level can effectively inhibit the incremental effect of relationship-specific transaction on IPO's abnormal initial return,and this effect is more significant in supplier relationship contract.Our research suggests that relationship contract has become an important commitment mechanism of abnormal initial returns of IPO Corporations,and the regional heterogeneity of financial development has resulted in the difference of the degree of the contractual commitment.This show us,in China,not only should we pay attention to the important role of "relationship trust",but also pay more attention to the reform and development of the financial process,in order to promote the healthy and orderly development of the stock market.