An Empirical Study Of IPO Underpricing In China:the IPO Systems Evolution And Determinants With Quantile Regression

Initial public offering(IPO)as an important step for private companies to go public and raise fund,plays a vital role in further development to these companies.For example,equity financing can influence the companies' capital structure,governance structure and operating efficiency.Therefore,to all related parties,new share's pricing process which will influence the result of actual amount of fund companies are able to raise,is essential during IPO.Moreover,the price of new shares can directly affect the supply and demand situation in capital primary market,which eventually can trigger underpricing or overpricing in IPO when listed company comes to exchange market,so this paper concentrates on interpreting and analysing the phenomenon of IPO underpricing in China with considering a series of transitions in Chinese IPO system.In this dissertation,a sample of 3343 Chinese IPOs from 1993 to 2018 are selected to test the influence of IPO system evolutions on the IPO underpricing level with one-way ANOVA through STATA.The ANOVA result indicates that the transitions in IPO system have profound impacts on the improvement of IPO underpricing phenomenon in Chinese primary market.After that,the OLS regression is carried out in STATA to find out the other key factors can significantly influence the magnitude of IPO underpricing.This regression model is established with seven independent variables based on the different IPO underpricing theories including issuing price,issuing size,time interval,agency cost,over-subscription ratio,initial turnover and underwriter reputation.A sample of 2142 IPO observations are selected during the period from 2006 to 2018.In addition,for better understanding these influential factors,the quantile regression is carried out in R-studio with the same sample and variables.Therefore,a more comprehensive image can be presented in this paper to interpret how these influential determinants affect the degree of IPO underpricing.According to the regression results,there are 5 variables including issuing price,issuing size,time interval,over-subscription ratio,and agency cost ratio can be seen as significant determinants of IPO udnerpricing,and both initial turnover rate and underwriter reputation are not considered as significant key factors of the magnitude of underpricing.