The Research On The Relationship Between Investor Sentiment,Underwriter Reputation And IPO Underpricing

Since the issue of IPO underpricing was proposed,there has been wide concerned by scholars.Early scholars thought the main reason was the underpricing in the primary market.The rise of behavioral finance makes scholars began to believe that the stock price is easily affected by the sentiment of investors.At the same time,scholars also believe that financial intermediaries can also influence IPO underpricing,in which the underwriter's reputation is quite representative,because the underwriters have a direct influence on IPO underpricing in the primary market.At the same time,the underwriter's image of reputation can affect the investor's decision in the secondary market and further affect the IPO underpricing.So,we will discuss whether investor sentiment can affect IPO underpricing,what the influence underwriters have on the underpricing IPO,and in the secondary market,how the underwriter affects the investor's role in the IPO underpricing.The answers will help us understand the cause of the underpricing and provide useful suggestions for those issues.Firstly,we summarize the classical theory of investor sentiment and underwriters reputation,learning from noise Trader theory,Certification theory,market feedback theory and so on.Afterwards,we sort out the impact investor sentiment and underwriters reputation have on the IPO underpricing,afterwards we analyze separately the effects of investor sentiment and underwriter reputation on IPO underpricing.Then from the perspective of secondary market investors,we analyze the effect of underwriter reputation on the relationship between investor sentiment and IPO underpricing.Then,we select 1123 companies listed in A-share between 2010 and 2016 as the research sample and explain IPO underpricing in China's capital markets from both investor sentiment and underwriter reputation.Finally,based on the above analysis and assumptions to draw conclusions.This paper draws the following conclusion.First,investor sentiment and the underpricing rate are positively correlated,the higher the investor sentiment is,the more blindly confident individual investors have,thereby the high investor sentiment raises the stock price and further causes the high underpricing.Second,the underwriters reputation has a significant inhibitory effect on IPO underpricing.The higher reputations underwriters have,the stronger pricing power they have.In order to keep their own reputation and thereby increase the price in the primary market.Therefore,it has an inhibitory effect on IPO underpricing.Third,the interaction between underwriter's reputation and investor sentiment in the secondary market has further contributed to the high underpricing.Although the underwriter only participated in the activities of the primary market during the IPO,its brand reputation in the secondary market could affect the market's response to its underwriting companies.The higher reputation underwriters have,the stronger brand recognition their underwriting companies have,the higher share price investors accept,and the higher the underpricing rates are.After reaching the above conclusion,we put forward the policy recommendations from four aspects:related systems,investors,underwriters and issuers.At last,we summarize the lack of research and make future prospects for the study.