Research On IPO Underpricing Under The Reform Of New Share Issuance System

The high underpricing of the IPO market will lead to imbalances in resource allocation in the primary market,irrational speculation in the secondary market,and long-term weakness in the stock market.After the major issuance reform at the end of 2013,the issue of underpricing in the stock issuance market became more prominent.For the first time there was a unique phenomenon in the China's issuance market that the new stocks continued to rising limit just like the Chinese character "Yi" in a row,that is,the new shares will be listed at the beginning of the market and continuously rose by the daily limit in the continuation of the trading day.Research on this issue is scarce,and the analysis of the causes and impact mechanisms is significant.In the theoretical analysis,this paper first reviews the pricing system reform over the years and compares the changes in the IPO underpricing rate.The main analysis is based on the first day's price limit.It is found that the delayed price discovery,liquidity interference,and volatility spillover effects are also applicable to new share issuance transactions.In the past,the calculation of IPO high underpricing in the literature cannot accurately reflect the value deviation of new shares after listing.Then this paper draws on the theory of limited attention of behavioral finance,herding effect,positive feedback and other theornes to expound that the continuous limit-up after the reform will further strengthen the speculation of investors and encourage the speculation of secondary market transactions,which leads to high underpricing of the IPO.In the empirical analysis,the study found that:(1)Overall,IPO's underpricing rate has significantly increased after the IPO limit was set on the first day of IPO.(2)After the implementation of the first day's price limit,there was a continuous limit-up phenomenon,which increased the exposure of the media and aggravated the enthusiasm for participating in the new shares subscription and trading in the secondary market.The IPO underpricing rate has further increased.(3)After the implementation of the first day's price limit,the speculation in the secondary market is more obvious,and the IPO underpricing rate of listed companies with low issue price and small number of issued shares is particularly prominent.(4)Propensity score matching(PSM)re-screened the sample data for regression analysis and found that both the ups and downs limits have a significant effect on the IPO's high underpricing.The results support the hypothesis.The research conclusions show that the important reform of the pricing system at the end of 2013 set the first day's price limit,resulting in an ultra-high underpricing rate of IPO.It has promoted the speculative atmosphere in the secondary market,which is not conducive to cultivating the ability of investors to judge and identify the value of enterprises,which is not conducive to the implementation of IPO marketization.Finally,compared with the previous literature,the contributions of this paper are as follows:(1)For the reason that the IPO underpricing rate after reform is different from the previous measurement methods,this paper conducts a detailed analysis of the theory and data.(2)This paper draws on the BW index constructed by Bake and Wurgler in 2006,and uses principal component analysis method to try to construct the emotional indicators of investors in the relevant aspects of new share issuance.(3)Try to analyze the influence mechanism of the first day's price limit on IPO high underpricing and enrich relevant research.(4)The model was tested by propensity score matching to make the conclusion more stable.