| China’s stock market has developed into the second largest stock market in the world since its pilot in 1989.It is an indispensable part of China’s capital market and plays a very important role in the development of national economy.In 2019,the central economic working conference proposed that "stabilize finance,foreign trade and investment".As a part of financial market,the stability and healthy development of stock market cannot be ignored.However,compared with the United States and other developed countries,China’s stock market has a short development time,and there are still many problems to be solved.Therefore,the research on the stock market is of great significance to both the academic and practical communities.IPO underpricing is common.Among them,the initial return rate of initial public offering(IPO)in China’s stock market ranks first in the world,and the average return rate over the years is easy to exceed 100%(new shares are unbeaten).In this context,new shares have become the object of "speculation" by investors.Existing studies have found that IPO has a negative impact on the secondary market(song et al.,2018;sun et al.,20,13).However,in China’s A-share market,there is a certain threshold for investors to obtain high initial return on IPO.Since 2014,the rules of IPO allocation on market value has been implemented for A-share,and investors can acquire the right to purchase 1000 new shares for every 10000 yuan of shares in the secondary market.In the context of IPO underpricing,investors must hold the secondary market shares to obtain the high returns of IPO,which may have a supporting role for the secondary market share price.So,under the ration on market value system,does the initial return on IPO have a positive impact on the secondary market share price? What is the impact on investors’ asset allocation?In addition to the rules of allocation,there are also rules of capital payment for new shares.Since 2016,the full prepayment of new shares has been officially cancelled.This reduced the threshold for new share subscription.The sudden increase of online and offline subscription accounts led to a decline in the success rate of new shares.According to the statistics of this paper,the monthly average winning rate of new shares in 2014-2015 basically maintained between 0.4% and 0.8%,and the monthly average winning rate of new shares in 2016 and later dropped to about 0.1%.After the cancellation of full prepayment of new shares,investors may be more inclined to buy low-risk secondary market stocks,so as to reduce unnecessary losses and improve the total income.So,will the cancellation of new share prepayment system affect the investment style of investors?Although new shares generally show serious underpricing,the degree of underpricing of different stocks is quite different.According to the statistics of this paper,if the issue price of new shares is less than five yuan,then new shares will limit up for eleven days on average.If the issue price is higher than thirty-five yuan,it will not be more than two days on average.Generally,the issue price has a negative correlation with the initial return rate of IPO.Then,will the IPO price itself significantly affect the initial return rate of IPO? If so,is there any difference in its impact on the IPO discount rate and premium rate? What is the influence mechanism?Based on the above facts and questions,this paper contains six chapters:The first chapter is the introduction.This part describes the research background,the main problems and main findings,the theoretical and practical significance as well as the innovation of this paper.The second chapter is literature review.This chapter reviews the existing domestic and foreign literature from three aspects: researches on IPO placement system,researches on the relationship between IPO and secondary market and researches on IPO pricing efficiency.Then this paper makes a comment on these documents,and leads to the starting points of this study.The third chapter studies the impact of the expected return of new shares on the stock prices of secondary market and investors’ asset allocation behavior.This paper first constructs a simple asset selection model.Then,this paper uses the IPO related data such as lot winning rate and initial return to calculate the monthly expected return of subscribe new stocks,which is used as a proxy of the value of new share subscription option.Then,empirical method is used to analyze the impacts of value changes of new share subscription option on the returns of individual stocks and investors’ asset allocation behavior.The results show that:(1)compared to the cash dividends,the return brought by IPO Subscription cannot be ignored;(2)the market value allotment system will rise the prices of stocks in the secondary market,the higher the value of the new share subscription option,the higher the stock prices;(3)value changes of the option to subscribe for new shares significantly affect the asset allocation of investors.When the value of the option increases,investors will allocate more stocks or even buy stocks on margin.The fourth chapter studies the influences of canceling the full prepayment system on investors’ investment style.Using the event study method,this paper takes the cancellation of the new share prepayment system on January 1,2016 as the event,and takes the book to market ratio,dividend yield ratio as the grouping indexes,divides the sample stocks into five groups,and calculates the cumulative average abnormal return(CAAR)of each group in the event window periods.The empirical results show that:(1)when taking the formal cancellation of the full prepayment system on January 1,2016 as an event,the higher the book to market ratio,the greater the CAAR;the higher the dividend yield ratio,the greater the CAAR.(2)the above conclusions remain robust when change the calculation method of abnormal return rate or take November 6,2015,the day on which the cancellation of advance payment Solicitation was announced as event day.On the whole,canceling the full prepayment system changed the investment style of investors and encouraged investors to invest more in value stocks.The fifth chapter studies the impacts of IPO pricing on initial return,primary market discount rate and secondary market premium rate.Referring to the existing research methods,this paper calculates the actual initial return of new stocks first,decomposes it into the primary market discount rate and the secondary market premium rate,and then empirically tests the impacts of new stock pricing on its primary market discount rate and secondary market premium rate.The results show that:(1)the higher the issue price of new stocks,the higher the initial return rate;(2)nominal price illusion is the main reason for this phenomenon,so the issue price will only affect the secondary market premium rate of IPO,but not the primary market discount rate of IPO;(3)the lower the issue price,the worse the long-term market performance;(4)Institutional investor ownership helps to mitigate the impact of the nominal issue price on the IPO premium rate;(5)investor sentiment and the uncertainty of the value of new shares are also matters,but both will significantly strengthen the impact.The sixth chapter summarizes the study,puts forward the corresponding policy recommendations,expounds the limitations and shortcomings of this study,and combs the research directions that can be expanded in the future.The research of this paper has certain significance:Firstly,this paper will make new contributions to the research on the relationship between the IPO and the secondary market and the research on the IPO allocation rules.Existing research mainly discusses the impact of IPO on the secondary market from three aspects: portfolio rebalancing(Braun and Larrain,2009),supply(Li et al.,2018;Ofek and Richardson,2000),and liquidity shock(Shi et al.,2018;Sun et al.,2013).Although the research perspectives are different,the conclusion is that IPO will have a negative impact on the secondary market share price.However,for the first time,this paper finds that IPO has a positive impact on the stock price of secondary market because of the rule of IPO allocation on market value,which enriches the relevant literature on the impact of IPO on the secondary market.At the same time,existing research on the rule of IPO allocation on market value is basically limited to qualitative analysis.This paper fills the gaps in existing literature.Secondly,this paper will make new contributions to the study of the factors affecting the investment style.There are few studies on the new share full prepayment system in existing literature,and previous studies mainly focus on the relationship between the new share full prepayment system and the behavior of institutional investors from the perspective of liquidity constraints(Liu Xia,2017).There are also studies suggesting that the cancellation of IPO full prepayment system reduces the threshold for IPO purchases and enhances the fairness of IPO placements(Li Wenjun et al.,2018).But few studies focus on the impact of the cancellation of new share full prepayment system on the secondary market.From the perspective of investment style,this paper finds that investors will tend to buy stocks with high book to market ratio and high dividend yield ratio after the cancellation of new share full prepayment system for the first time.That means the cancellation of IPO full prepayment system has an impact on investment style.This paper expands the relevant research on the new share full prepayment system.Thirdly,this paper enriches the relevant literature of IPO pricing efficiency theory and nominal price illusion theory.The existing research on IPO pricing efficiency is very rich.In the past,the literature studies the reasons of IPO underpricing from supply(Miller,1977),principal-agent(Baron and Holmstrom,1980),winner curse(rock,1986;Beatty and Ritter,1986),goodwill theory(booth and Smith,1986)and other aspects.In addition,there are many literatures study the special phenomenon of financial market from the perspective of nominal price illusion,such as typical management catering theory(Baker et al.,2009),low price premium effect(Fritzemeier,1936;Luo Jinhui et al.,2017),etc.However,there is no research combines nominal price illusion with IPO premium.Based on behavioral finance theory,from the perspective of nominal price illusion,this paper studies the impact of IPO price on the primary market underpricing rate and secondary market overvaluation rate of new shares,which enriches the relevant research on IPO pricing efficiency.Finally,the research in this paper is conducive to enhancing regulators’ understanding of multifaceted role of IPO allocation rule.It is helpful for investors and regulators to fully estimate the impact of changes in IPO initial return.And this paper is of significance for policy makers and regulators to fully measure the impact of the implementation and cancellation of the IPO full prepayment system on secondary market.It also helps regulators to better understand the effect of nominal price illusions on investors’ behavior.At the same time,it has a reference value for regulators to give full play to the role of institutional investors in stabilizing the market and improving the efficiency of stock market pricing.The innovation of this paper is mainly reflected in three aspects: firstly,this paper studies the influence of the rule of IPO allocation on market value and IPO full prepayment system on the stock price and investors’ behavior in the secondary market for the first time.This paper innovatively proposes that the impact of IPO on the secondary market is different from that of the existing literature under the rule of IPO allocation.At the same time,from the perspective of investors’ investment style,this paper studies the impact of the cancellation of IPO full prepayment system.Secondly,this paper puts forward the concept of new share subscription right for the first time,which will give some enlightenment to the follow-up research.This paper finds that,compared with dividend,the value of subscription right of new shares in secondary market stocks should not be ignored.And it can be used for reference in the research based on dividend discount model.Thirdly,for the first time,this paper studies the influence of IPO price on IPO underpricing rate and overvaluation rate,which is a supplement to the existing research.Moreover,because there is no historical price interference,taking new shares as the sample provides a good natural experiment to study the phenomenon of " Low Price Premium Effect". |
PDF Full Text Request