Information Disclosure Of Intended Uses Of Raised Money And IPO Underpricing

The sustained and rapid development of China's economy has promoted the prosperity of China's stock market.The issuance of new shares is popular among companies,and it becomes an important channel for companies to expand their scale through equity financing.As more and more companies choose to go public,the Chinese stock market shows some characteristics consistent with other countries.The most notable one is the underpricing phenomenon,which is a common problem in the financial market and has always been a hot research topic.Compared with other developed and developing countries,the problem of IPO underpricing in China is even more serious.The China Securities Regulatory Commission suspended the issuance for new shares in 2013.On November 30,2013,China Securities Regulatory Commission issued the No.42 announcement named "Opinions on Further Promoting the Reform of New Stock Issuance System",aiming at promoting the transition of stock issuance from approval system to registration system gradually.One of the key points is to improve the quality of information disclosure of listed companies,which can be summarized as follows: clearly define responsibilities and improve standards in advance,strengthen supervision in the process,increase punishment intensity and establish supervision authority afterwards.The regulation focuses on protecting the right to know,participate,supervise and claim of small and medium sized investors.Therefore,our research question is whether the regulation is effective in improving information quality and thus reducing underpricing.We choose 1314 companies issued in Shanghai Stock Exchange and Shenzhen Stock Exchange from 2009 to 2017 as samples.Through the empirical test,we get the following results:(1)Post to the regulation,although the degree of information disclosure declines,the information disclosure can reduce underpricing to a greater extent,indicating that the information disclosure quality is improved overall.(2)Post to the regulation,the information disclosed by the new shares issued by the older company or prestigious underwriter can reduce the underpricing to a greater extent,which did not exist in the past.That is to say,since 2014,the information disclosed by such new stocks can solve the information asymmetric problem better,thereby reducing underpricing.It further demonstrates that the quality of information disclosure,including credibility,authenticity and reference value,has been enhanced,and the policy is more effective for new shares with older company or prestigious underwriter.(3)Prior to the regulation,the information quality disclosed by the company with larger shareholding of the largest shareholder is relatively lower and thus the reduction effect on underpricing is lower.Post to the regulation,the difference of information disclosure reduction effect caused by the shareholding of the largest shareholder has been reduced,which shows that the quality of information disclosure has been improved as a whole,and the policy effect is more significant for the companies with larger shareholding of the largest shareholder.(4)In addition,after considering the fixed effects of year and industry,we find that the second index,dummy variable index,can better measure the degree of information disclosure.In our paper,we have made the following contributions to previous studies:First of all,although many researchers in the financial field have studied the issue of underpricing of new shares in China,the first day underpricing rate is limited to 44% since 2014,almost all the new shares reach the ceiling of the price limit.Due to the existence of the first day price ceiling,researches on underpricing starts to decrease,there are fewer researches investigating the effectiveness of the regulations.By calculating the real underpricing rate for new shares issued during the post-regulation period with the equilibrium price,we broaden the research field,explore the effectiveness of the regulation,identified the remaining problems and put forward rationalization proposals to help regulators improve the efficiency of supervision towards the information disclosure,which has a particularly important practical significance for promoting the continuous improvement of the capital market.Secondly,we measure the degree of information disclosure from both quantitative and qualitative perspectives by hand collecting data from prospectus,so as to study the relationship change between the degree of information disclosure and underpricing and reveal the changes of information disclosure quality.In addition,we investigate the changes of the difference of the reduction effect that information disclosure owns on underpricing based on the ages of the company,the underwriter reputation and the shareholding of the largest shareholders,so as to further study the change of information disclosure quality.