A Research On The Impact Of The GEM Allotment Mechanism On IPO Underpricing

IPO underpricing means that the issue price of the shares in the primary market is lower than the price of transactions in the secondary market transactions,and there is a significant IPO underpricing in the Chinese stock market.IPO underpricing is the inefficient in pricing of new shares,which refer to the market lack of resource allocation capabilities.Stock issuing system is an important factor that affects IPO underpricing,and the allotment of new shares is an important part of Chinese stock issuing system.China Securities Regulatory Commission released "Guiding Opinions on Deepening the Reform of IPO System Issue" on October 11,2010 and reformed the rules for allotment of new shares on the Small and Medium-sized Enterprise Board(SME)and the Growth Enterprise Market(GEM)in China.The effective quotation agencies that will meet the conditions will be adopted randomly allotment method.The paper research the impact of new shares allotment for IPO underpricing,and the previous literature mostly focuses on the impact of the new stock issuance system or pricing mechanism on the IPO pricing efficiency of the stocks.There is not much research on the IPO placing method.Firstly,this article clarifies the research background and puts forward the research significance of this paper.Then it establishes the framework and research methods of the article.Then it reviews and summarizes the literature and theoretical basis of IPO underpricing both at home and abroad.After that,it focuses on the placement system in China's new stock issuance,reviewed and summarized the historical evolution of the distribution system reform,laying the foundation for the next empirical research;In the empirical analysis,adopting the GEM stocks issued during the period from October 30,2009 to October 31,2012 as the study sample,and using a difference-in-difference(DID)model to examine the effect of allotment mechanism reform on IPO underpricing.In the research of allotment mechanism reform of GEM and IPO underpricing,the traditional OLS method was adopted in the first,and then the DID method was used to examine the net effect of the policy of the allotment mechanism reform.The results of the DID method Compared with the traditional OLS method,it is concluded that the reform of the allotment mechanism has no significant impact on the IPO underpricing.After that,the mechanism of placing mechanism was compared between GEM and SME board,analyzed the difference in the effect of allotment mechanism for IPO underpricing.Finally,the conclusion was drawn that the reform of the allotment mechanism has no significant effect on the IPO underpricing level of the GEM,but it has a significant reduction effect for underpricing level on the SME.The main reasons are: the establishment time of GEM is short and the relevant mechanism is not mature;the GEM is primarily a start-up company and the market risk is relatively high.Therefore,the IPO underpricing can compensate for the risk.Based on the conclusion of the empirical analysis and the development of the stock market in our country,the paper put forward four policy recommendations in the last: Improve the relevant systems of the stock market and promote the market-oriented reform of the capital market;optimize the investment team,popularize the concept of rational investment;construct the credit inquiry system of inquiry object,regulate the offline inquiry behavior;strengthen the information disclosure of listed companies and reduce the information asymmetry.