Research On Efficiency Of China New OTC Market

As the shortest and fastest developing market in China,the New OTC Market has developed into the foundational securities market with the largest number of listed companies in the world.At the same time of rapid development,the New OTC Market is also facing a series of problems and challenges,even is questioned whether it is necessary to continue to develop.In view of this,this paper starts from the construction of the multi-level capital market system,analyzes the founding logic of the New OTC Market,and probes into the function orientation and heterogeneous market mechanism design of the New OTC Market.This paper systematically analyzes the allocation efficiency,information efficiency,pricing efficiency and operating efficiency of the New OTC Market on the basis of combing the theoretical framework of the efficiency of the capital market,probes the reasons leading to the low efficiency of the New OTC Market,and reveals the path and direction of promoting the efficiency and the rapid development of the New OTC Market in future.On the basis of the separation equilibrium model under the condition of incomplete information,the paper clarifies that the capital market is stratified and refined.It provides a "signal" for investors to distinguish the quality(investment value)of enterprises,which can realize the separation equilibrium of different enterprises and partly alleviate the problem of information asymmetry in the capital market,multi-level construction,therefore,has become the common choice of the development path of the capital market in practice.As a relatively independent basic capital market in China’s multi-level capital market system,the New OTC Market is significantly complementary to other markets.Based on the Lokta-Volterra model,the whole-period test founds that the New OTC Market has a positive effect on the trading scale of other markets and the sub-period test shows that in the different stages of the New OTC Market,the effects on other markets are different,but all of them have no negative effect which indirectly confirms that the market stratification enhances the efficiency of the capital market system and at the same time proves the value and significance of the creation and existence of the New OTC Market.Based on the logic and background of the multi-level capital market system,the evaluation of the New OTC Market should be placed under the mature framework of efficiency theory analysis.This paper selects four kinds of efficiency,which are allocation efficiency,information efficiency,pricing efficiency and operating efficiency,to analyze the efficiency level of the New OTC Market.The core function of the New OTC Market is resource allocation,which includes two stages of financing links and the use of funds of two stages.The resource allocation efficiency can be analyzed by Jeffrey Wurgler model and DEA model.The test results show that: in the financing stage,capital allocation function of the New OTC Market is mostly inefficient or even invalid,even though the individual test results show it is effective;in the use of funds stage,the New OTC Market listed is at a relatively low level,with less than 5% listed companies reach the ideal level.Furtherly,compared with the steady improvement of resource allocation in other markets,the New OTC Market’s low efficiency is not only reflected in the level,but also in terms of trend.Adequate information and reasonable market pricing are the prerequisites for the optimal allocation of resources.As the reason for the poor allocation efficiency of the New OTC Market,it is natural to investigate its information efficiency and pricing efficiency.The test results show: in terms of information efficiency,with the run test and event study,the new OTC Market has achieved weak efficiency,but not semi-strong efficiency;in terms of pricing efficiency,with the indicator of information content of stock price(that is,the synchronicity of stock price),the pricing efficiency of each market from low to high is as follows: the New OTC Market < Second-board Market < SME Board Market < Main-Board Market.In addition,the information content of the stock price of the market-making stock is obviously higher than that of the agreed transfer stock,and the information content of the stock price of the innovation layer is obviously higher than that of the base layer.The unreasonable resource allocation,inadequate information reflection and inaccurate pricing originate from the actual operation of the market.Considering that implicit transaction cost reflects transaction execution cost,it can fully reflect the real situation of market operation.It can be used to measure and analyze the operating efficiency level of the New OTC Market.The calculation result of the implicit transaction cost of each market including the New OTC Market by using the high low price spread model(H-L model)shows that the operating efficiency of the four markets in order from low to high is: the New OTC Market < Second-board Market < SME Board Market < Main-Board Market.the New OTC Market has the lowest operating efficiency.The analysis of the factors affecting the implicit transaction cost of the New OTC Market by panel data shows that the operation efficiency of the New OTC Market is affected by the factors of market quality and company quality.However,an investigation of the trading system of the New OTC Market by using the DID-model shows that after the "agreement" turns to " market-making ",the implicit transaction costs of the related sample stocks reduce,the market liquidity increases,and the volatility decreases.The results show that the market maker system plays a significant positive role in improving the efficiency of the New OTC Market,but compared with other influencing factors,the correlation coefficient of the market maker is smaller,and the role of the market maker needs to be further improved.This paper has made some innovative attempts in the following four aspects:Firstly,the reverse selection and separation equilibrium model under the condition of incomplete information in the capital market is constructed,the hierarchical differentiation of the capital market and the logic of the creation of the New OTC Market are analyzed and explained,and the Lotka-Volterra population relationship model is used.The interaction between China’s multi-level capital system plates,including the New OTC Market,is analyzed for the first time,which proves the Pareto improvement effect of the creation and introduction of the New OTC Market for the China’s multi-level capital market system.Secondly,on the basis of a comprehensive review of the evolution of capital market efficiency theory,this paper clarifies the internal logical relationship among different efficiency: taking the basic function common to the capital market at all levels-resource allocation as the core index and comprehensive mark of overall efficiency,to reflect the mobilization ability and utilization of financial resources in the New OTC Market.This paper studies the logic and reason of the low allocation efficiency of the New OTC Market by the information efficiency and the pricing efficiency,and analyzes the micro basis of the unreasonable resource allocation,the insufficient information reflection and the inaccurate pricing by the operation efficiency of the New OTC Market.A more rigorous evaluation system of the market efficiency of the New OTC Market is constructed.Thirdly,the paper,,makes a comprehensive and systematic evaluation and analysis,for the first time,of the allocation efficiency,information efficiency,pricing efficiency and operation efficiency of the New OTC Market by using the unified econometric research method of the capital market.Especially,taking the indicator of index of stock price synchronism and implicit transaction cost to measure and compare the information efficiency and operation efficiency of different markets,including the New OTC Market.It solves the defect that the efficient market theory can only analyze the absolute market efficiency with or without any concept,and it can measure the market efficiency level more meticulously,and it also makes the efficiency level of different markets comparable.Fourthly,the concept of allocation efficiency is expanded properly,and the allocation efficiency of the New OTC Market is comprehensively analyzed in two stages,two methods and three dimensions,focusing on the whole process of capital circulation.Jeffrey Wurgler model and DEA analysis method are used to analyze the allocation efficiency of the financing process and the investment process of the New OTC Market.In order to avoid the bias caused by individual link allocation efficiency,this paper makes a panoramic comparison of the allocation efficiency of different sectors of the multi-level capital market system in China.