The Research On The Reasons Of IPO Under-pricing In China’s Growth Enterprise Board Market

Initial Public Offerings under-pricing is universal phenomenon in the worldwidecapital market. According to the efficient market hypothesis, this phenomenon doesnot exist. Therefore, it is called "IPO mystery" by Ibbotson. Many domestic andforeign scholars study its reasons with the market in their country, so a completetheoretical system came into being. But there are many significant differences innational markets about IPO under-pricing; therefore, no one can alone explain the IPOunder-pricing of all the markets. The China’s Growth Board Market opened onOctober23,2009.The opening of the GEM not only provides a channel andconvenience for mini enterprise in financing, but also enrich and improve Chinesecapital market. However, IPO under-pricing in the GEM is higher than main boardmarker because of its short history, the peculiarity and incomplete system of China’sGEM. So there are important theoretical and practical significances if we find out thereasons of under-pricing through the correlative mature theory and existing data in theGEM.The paper firstly reviews the theory of domestic and foreign IPO under-pricingbasis on a great quantity reading literature; then it sum up the influence factors of IPOunder-pricing in the GEM according to the Signaling Theory, Behavioral EconomicsTheory and Institutional Economy Theory; next, it establish the model, set up thehypotheses, select the companies listed on GEM in China on October30,2009toNovember30,2011as sample, analysis empirically the various the influence factorsof IPO under-pricing in the GEM with Signaling Theory, Behavioral EconomicsTheory and Institutional Economy Theory. The conclusions of Empirical Analysis areas follows: is basically valid but not completely effective with Signaling Theory,Behavioral Economics Theory and Institutional Economy Theory testing the level ofIPO under-pricing. Of Signal theory, the indicators of scientific and technologicalcontent and asset-liability ratio can better explain the GEM IPO under-pricing. Butthe indicators of Return on assets, total leverage, and the time company was foundedhave less explanatory power. Of Behavioral Economics Theory, the indicators of issuesize, time interval of issued and listed, and turnover ratio can better explain the GEMIPO under-pricing. The price-earnings ratio and IPO under-pricing rate have littlecorrelation coefficient. Of Institutional Economy Theory, the implementations of thesecond new shares have a significant impact on IPO under-pricing. Finally, this paper make a suggestion that IPO under-pricing tend to bereasonable from the view of corporate information disclosure, rational investment andthe regulatory perceptively according to research findings.