The Effect Of Corporate Governance Upon The China's IPO Undrepricing

For nearly three decades, domestic and foreign researchers has already been much concern about company's initial public offering underpricing. To date, China scholars in this "IPO underpricing puzzle" also gives a lot of reasonable explanation. However, Chinese the short-term IPO underpricing has been substantially higher than the mature markets of the West that this issue needs further and find out. China's securities market is a product of economic transition, with distinct Chinese characteristics, mainly that the Government has strict regulations and low levels of corporate governance. The functions of government transformation and the constant optimization of the level of corporate governance in China is "emerging and transitional"tide of economic development among the inevitable relaxation of government control will affect the corporate governance structure to optimize the role of the market signal display. In the long run, IPO pricing will finally be determined by a listed company corporate governance structure, financial situation, the company in which stages of development and industries in which market-oriented indicators, rather than the government's layers of review and supervision. This paper argues that government regulation of corporate governance constraints show the value of the company's own high IPO underpricing in China produced one of the main factors.Raise the level of corporate governance is a rapid and steady development of long-term and long-term benefits of the protection of investors, should be in the company's capital market financing that they can be embodied in the important factor. Unlike mature markets in China, the whole process of IPO, the government plays an important role, it must not only bear the responsibility of market supervision, but also the quality of the issuer to review the situation, the security. In 2008, Nankai University, published "China's corporate governance evaluation index" shows that the level of Chinese corporate governance is being increased year by year. In fact, improved corporate governance in China, the Government is still available for sale through the IPO market access and regulatory mechanisms for the formation of a capital market of government control. Evident in government-controlled market, whether because of the Government's strict control and the weakening of investor focus on corporate governance factors, the degree? As the market-oriented knowledge management to enhance and promote the deepening of IPO market-oriented reforms, as well as raising the level of corporate governance, we have reason to believe that corporate governance factors are the market when the IPO pricing consideration.The IPO of China's distribution system has experienced years of examination and approval system for 1993-2000 and from 2001 to the present two major stages of the approval system, which is further divided into the examination and approval system under the quota management phase of 1993-1995 and 1996-2000 Indicators administration phase; approval system is further divided into the period 2001-2004 under the channel system and the system sponsor since 2005. In the examination and approval system under the government control serious, from the material submitted to the trial will be made then this series a long honeymoon period, largely contributed to the formation of shell resource listed companies, but also for a number of relevant departments rent-seeking provides the soil. This system design, the market, investors little concerned about the intrinsic quality of listed companies, we believe that as long as the market is good, and is profitable. Therefore, in this context, corporate governance, as a long-term rate of return on shareholder protection of the fundamental factors that have been ignored by investors. In this paper, empirical methods, testing of this phenomenon since the introduction of approval system is improved. The empirical results show that corporate governance to some extent reflected in the pricing of the IPO, and finally for the IPO underpricing have an impact. However, as corporate governance proxy indicators selected seven variables, only three and significantly related to IPO underpricing, other are not significant. This shows that government regulation is a result of inhibition of the investors concerned about corporate governance enthusiasm. As a listed company can not effectively show their value to the market of information, which largely reduces the efficiency of the market price discovery, which has prompted investors to pay more attention to the market policy, the message. Another result is that government regulation caused the number of IPO companies and demand can not achieve equilibrium in the market, which has to a certain degree of long-term presence in a market, a lot of money to obtain excess returns provided the conditions. Therefore, only through the relaxation of government control and improve the overall governance of listed companies is to reduce the long-standing severe IPO underpricing in the fundamental path selection, and thus can stay permanently in a huge sum of money on the market generate crowding-out effect. In addition, the relaxation of government control, strengthening the rule of law required by regulation can speed up the stock market, supporting regulations, laws and regulations of the building process. And any local, technical or formal IPO reform measures, such as the approval system, simple market-based inquiry, the stock distribution, and so are palliative approach. In the end, the legal environment of continuous improvement in the market, the Government further deregulation, and the rising level of corporate governance under the conditions continue to promote the IPO in the market, and gradually move to the registration system is the fundamental way to solve the problem.