A Research On The IPO Under-Pricing Of Minor Enterprises Board

IPO under-pricing, or the excess rate of return in the first listing day, is prevalent all over the word, and the scholars have done a lot of research on this phenomenon.According to this article, IPO under-pricing is especially obvious in China. As to the whole market, since 1990, the year we established the Shanghai stock exchange and Shenzhen stock exchange, the average IPO under-pricing level is 415.80%, not only exceeding that of the USA market, but also greater than that of other emerging markets. As to the minor enterprises board, in the period of June 2004 to February 2008, the average IPO excess rate of return is as high as 145.82%, dramatically exceeding that of the new shares of Shanghai main market in the same term, which is also the main issue of this article.Based on the correlation analysis and Granger test, the opening rise rate of new share in the first listing day becomes the first factor, we find, which affects the IPO under-pricing level. According to the foreign and domestic theories, we put other 44 factors into the regression model, and find 11 factors, such as turn over rate, subscription rate, current ratio and initial offerings market value, closely relating with the IPO under-pricing.As shown by the information asymmetry, speculation and issuing system are the reasons of IPO under-pricing of our market. Because of the more severe information asymmetry and speculation problems, the IPO under-pricing of the minor enterprises board is higher than that of Shanghai main market. Although the under-pricing could attract more money and compensate the asymmetry, it may also result in market malfunction, over speculation and push up the issuing price, which should induce enough caution of Shenzhen stock exchange.At present, Shenzhen stock exchange mainly adopt temporary transaction suspending policy to limit the over speculation, but not very effective. In order to reduce the IPO under-pricing, we suggest Shenzhen stock exchange improve the temporary transaction suspending policy, rearrange the timetable of issuing and listing to reduce the rotation of the money purchasing new shares, and make use of price limit-up policy in the first listing day.