| First, in this paper, we concentrated ourselves on the IPOs (Initial Pulic Offerings) of the Shenzhen SME (Small and Medium-sized Enterprise) and the GEM (Growth Enterprise Market) Boards, trying to find theoretical and empirical factors influencing the IPO price and underpricing. Based on the several assumptions firstly made, including the firm commitment contract between the issuer and the underwriter, commission as the only IPO fees and that the underwriter has a better understanding of the capital market than the issuer, this article introduced the net interest model from Juntao Du(2004). The model had reached an inclusion that with the assurance of the issuing success, underpricing is equilibrium when both of the issuer and the underwriter maximize their interests. The model also had two inferences, in which Du deducted mathematically that with a fixed number of issuing shares, the optimal offering price and the initial rate of return were respectively a decreasing and an increasing function of the ratio of underwriting fees without offering economic explanations.Second, we started with 368 IPO samples from June,2006 to February, 2010 in the Shenzhen SME Board and GEM board, established two empirical models for the issue price and underpricing (with adjustments to the initial rate of return) considering the statistics of the data and the conclusions from the former studies. These two empirical models not only confirmed the previous two propositions, but also made economic explanations that the ratio of the underwriting fees was a signal reflecting the relative position or the bargaining power of the underwriter. The stronger the signal was, the more powerful the underwriter was. Therefore, with the presumption of the firm commitment contract, the underwriter must not only be satisfied with obtaining the underwriting fees, but also brought more attention to itself with the investment income. Thereafter, the underwriter had an incentive to embrace its information advantage to suppress the issue price and hence got higher initial rate of return adjusted by the rate of return of the corresponding index.Third, another thing in particular, the square of the log form of the number of shares outstanding has probably never been introduced into the traditional IPO underpricing model except us. We followed this method and found that the scale reduces its negative effect on the adjusted initial rate of return as the scale grew. In addition, with the comparison between the two empirical models, we discovered that relative to the issue price model, the underpricing model was more subjected to the systematic market factors than those reflecting the company's intrinsic value. |
