The Influence Of The IPO First-day Price Limit On Ipo Underpricing

IPO underpricing is the phenomenon of abnormal high excess return on the first day of IPO.IPO underpricing rate in China is always above the average level in the world,which is closely related to the system of stock issue market in China.At the end of 2013,the Shanghai Stock Exchange proposed to implement the first-day price limit policy,that is to say,the maximum increase of new shares on the first day shall not exceed 44% of the issue price,and the maximum decrease shall not exceed 36% of the issue price.The policy strictly limits the price range on the first day of IPO,which to some extent alleviates the phenomenon of sharp rise and fall on the first day of IPO,but it is closely followed by the phenomenon of the stock price keeps rising to the limit in consecutive several or even dozens of trading days after the first day.In this paper,the first-day price limit and IPO underpricing rate are combined to explore the actual impact of the policy on China's stock market in the implementation process,this has practical reference significance for the market-oriented reform of new share issuance.In this paper,a total of 1828 IPO stocks from July 1,2009 to August 31,2019 in Shanghai Stock Exchange and Shenzhen Stock Exchange are selected as the research samples,we use multiple linear regression model and propensity score matching model for empirical research,and draw the following conclusions: 1)Whether in the multiple linear regression model or the propensity score matching model,the price limit of the first day will significantly improve the IPO underpricing rate.2)The short-term market atmosphere has a significant positive impact on IPO underpricing rate,and the first-day price limit will have an interactive effect with the short-term market atmosphere,that is,when there is the first-day price limit,the positive impact of market atmosphere on IPO underpricing rate will be further enhanced.3)Whether or not there is the first-day price limit,the fundamentals of the company will have a significant impact on IPO underpricing.when there is the first-day price limit,investors will pay more attention to the company's financial risk and reputation,while the company's profitability and growth ability will be reduced.Compared with the previous literature,this paper has the following innovations: 1)The research perspective is novel.In this paper,the firs-day price limit policy of new shares issued in the end of 2013 is a policy formulated by regulators in recent years to regulate the secondary market price,this paper combines the policy with IPO underpricing,and discusses the actual impact of secondary market price regulation on China's securities market.2)The model of propensity score matching is introduced to enrich the empirical research methods.On the basis of multiple regression,we use the propensity score matching model to test the robustness of the empirical results,so that the model results are more reliable.