Research On The Underpricing Factors Of IPO In China's Stock Market

IPO Underpricing refers to the phenomenon that the IPO price in the primary market is significantly lower than the initial transaction price in the secondary market,resulting in a higher risk-free excess return.China's IPO underpricing phenomenon is quite prominent,which reduces the efficiency of resource allocation in the stock market.Therefore,it is of great theoretical and practical significance to study the influencing factors of the high underpricing of IPOs in China and put forward relevant policy recommendations.At present,there are underwriter theory,signal theory,investor sentiment theory and expectation theory to explain the phenomenon of IPO underpricing at home and abroad.These theories explain the reasons of IPO underpricing to a certain extent.Based on these theories,this paper uses WIND database to analyze the IPO data of Chinese A-share market from 2016 to 2017,establishes a multiple regression model,chooses 8 explanatory variables,and uses mixed OLS estimation method to make an empirical study on the underpricing phenomenon of Chinese IPO and its influencing factors.The study finds that seven factors have significant effects on IPO underpricing: turnover rate on the first day of listing,net market rate on the first day of listing,industry PE,issuance rate,on-line winning rate,the ratio of circulating shares to total equity and net asset return.The results show that the initial turnover rate is negatively correlated with the underpricing rate,with an increase of 1% in the initial turnover rate and a decrease of 2.74% in the IPO underpricing rate;the first day net market rate is negatively correlated with the underpricing rate,with an increase of 1% in the first day of listing and a decrease of 4.84% in the IPO underpricing rate;the industry PE is positively correlated with the underpricing rate,with an increase of 1% in the industry PE and an increase of 1.1% in the IPO underpricing rate;the issuance rate is negatively correlated with the underpricing rate and the is The rate of underpricing of IPO increased by 1%,the rate of underpricing of IPO decreased by 1.7%;the rate of online underpricing was negatively correlated with the rate of online underpricing;the rate of online underpricing increased by 1%,the rate of IPO underpricing decreased by 1.5%;the circulation market value was negatively correlated with the underpricing rate,the the circulation market value increased by 1%,the rate of IPO underpricing decreased by 1.84%;the rate of return on net assets was positively correlated with the rate of IPO underpricing,the rate of return on net assets increased by 1%,and the underpricing rate of IPO increased by 0.54%.The fundamental reason for the high underpricing of IPO is that the new stock issuance system in China's stock market is imperfect,the approval guidance leads to the shortage of new shares in the market,and the pricing mechanism is unreasonable,secondary market speculation prevails,which pushes up the price of new shares.Therefore,it is necessary to reform the new share issuance system as soon as possible to effectively play the decisive role of the market in allocating financial resources.Combining with the background of current stock reform and development in China,this paper studies the necessity and feasibility of the reform from approval system to registration system.At present,our country has a perfect relevant legal system,and the quality of the market subject is high,acceptance can be strong,so we can achieve the transition from the approval system to the registration system.However,at present,the transition from approval system to registration system will encounter problems such as low level of government supervision,incompatible legal system,imperfect information disclosure system,unclear division of responsibilities of intermediaries,and difficult protection of investors' rights and interests.In view of these problems,this paper puts forward some countermeasures,such as improving the external regulatory environment,establishing a supporting system,reasonably designing information disclosure rules,adopting a gradual reform path,and strengthening the protection of investors' rights and interests.