Study On The Efficiency Of Ipo In China’s GEM

After10years’ preparation, china’s GEM finally was opened on October23,2009inShenzhen stock exchange and became indispensable part of Multi-level capital market in china.However, most listed stocks presented high IPO underpricing, but lately broke the issue pricing.The problem of IPO underpricing and pricing breaking go against the healthy development ofChina’s GEM, and ultimately affect the efficiency of capital market or even the development ofthe national economy. So, studying the effectiveness of the IPO pricing on the GEM has veryimportant significance in theory and practice to improve the financing efficiency of small andmedium enterprises and china’s capital markets operation environment.This paper studies the IPO pricing effectiveness on the GEM by the qualitative andquantitative methods. First, through the qualitative method, analyze the IPO underpricing andpricing breaking to judge the IPO pricing effectiveness on the China’s GEM. Then, test IPOpricing effectiveness by using the quantitative. We use the debt paying ability, operation ability,profitability, development ability and capital scale to measure the intrinsic value of the listedcompany. Meanwhile, use the issue volume, total equity after issuance, market volatility andunderwriters reputation to measure the external factors. Use the internal and external factorsindex as the independent variable, the issuing price of IPO and market-watchers closing price asthe dependent variable for stepwise regression analysis. Then, according to the result of analysis,judge the effectiveness of the IPO pricing on the china’s GEM.Study shows that IPO issue price and Market-watchers closing price both reflect thecompany’s internal and external factors. Meanwhile, the issuing price has higher fitting degree,which shows that the IPO pricing is more effective. But high underpricing and price breakingshow the IPO pricing is too high. In addition, market-watchers closing price is greatly influencedby the market volatility, which shows that there are serious speculative atmosphere in thesecondary market. Finally, put forward some relevant policy advice to further enhance the IPOpricing effectiveness on China’s GEM.