Research On IPO Underpricing

IPO underpricing has long been the interest of both academic and pratice fields.In A share market where relevant rules keep changing,it is necessary for researchers to alter their focus according to the change of the rules.Since 2014,two new regimes has been introduced into A share market,which are first-day price limit and limitation on issuing PE ratio(no more than 23 times).Since both new rules have an important effect on A share market,we need to update our research on the IPO underpricing under the new rules.The main contributions and innovations of this paper are as follows: Under the new IPO system of A shares after 2014,the pricing of new shares has been greatly limited,and the pricing of primary market and secondary market are separated to a certain extent.On this basis,the differences between the underpricing rate of IPO and the inquiry system are studied.In addition,this paper studies the issue of IPO underpricing from the perspective of the system of restricting the first day's rise and fall,which complements the deficiencies of current research in this field in China.The theoretical analysis and empirical analysis in this paper show that the price-earnings ratio and price-fall limit both improve the underpricing rate of IPO and reduce the efficiency of IPO pricing,which has a certain reference significance for further reform of the new share issuance system.The main structure of this paper is as follows: The first part introduces the research background and significance of this paper,summarizes and analyses the literature review of IPO underpricing rate at home and abroad;the second part introduces the reform process of China's new share issuance system and the changes of the pricing mechanism of new shares in different stages of the reform,as well as the changes of the underpricing rate of IPO in different mechanisms,and at the same time introduces two new IPO issuance systems in 2014.The third part discusses the selection of explanatory variables under the restriction of the first day's rise of new shares,and establishes that the first day's return is replaced by the first day's return from the first day of listing to the first day of opening up to meet the current actual situation;the fourth part discusses the main factors affecting the opening rate under the current system,and selects the new stock industry market.Earnings ratio and heat factor of secondary market are the main variables,and the influence of the selected variables is tested through empirical research.The main conclusions of the fifth part are as follows: if the opening rate of return is used as a measure,the underpricing degree of new shares will not decrease but rise under the first day's increase limit,which shows that simple increase limit can not fundamentally reduce the underpricing of IPO.The system did produce artificial underpricing in the pricing process of new shares and eventually intensified the cumulative increase of new shares after listing.The main conclusions of this article include: Judged by the gauge given by this article,the degree of underpricing in A share market has increased rather than decreased since the introduction of first-day price limit.So it is obvious that the underpricing problem cannot be mitigated merely with simple price limit;PE ratio limit does have a negative effect on underpricing;Secondary market fads have always been a major contributor in IPO underpricing of A share market.Therefore,this paper suggests that the system that artificially restricts the priceearnings ratio of IPO issuance and the limit of price rise and fall,which has a negative effect on the underpricing rate of IPO,should be abolished.A-share should restore the inquiry system,enable issuers and investors to regain their bargaining power,speed up the promotion of registration system to approach the problem of insufficient supply of new shares from the root,and ultimately make the price discovery function of capital market better delivery,so that the market plays a decisive role in the allocation of resources.