The Research Of Underwriter Reputation And IPO Enterprises’ Quality Under The Sponsor System

The sponsor system has been running for ten years in China capital market since its implementation in2004. On the one hand, this system helps to strengthen the "information producers" and "certification intermediary" function and status of financial intermediaries. On the other hand, it is also conducive to promote the formation of reputation mechanism of financial intermediaries and thus improve the environment of stock market. Currently, China Securities Regulatory Commission (CSRC) is trying to push the transition from approval system to registration system, which plays an active role in stock issuance links. As the stock market was set up for a long time in China, this paper sets to analyze the relationship between underwriters’ reputation and IPO firms’ operation quality since the implementation of sponsor system, hoping to draw a preliminary conclusion about underwriter reputation mechanism in China affirming the guide role of sponsor system.This paper focuses on the underwriters’ reputation mechanism in the stock market. Reputable underwriter will choose to underwrite good quality of firms under the improved underwriter reputation mechanism, so as to attract large numbers of investors.This paper uses the theoretical research and empirical analysis of the ways to analyze the underwriter reputation mechanism. Firstly, the literature review reflects that under the background of improved capital market and underwriter reputation mechanism, most research results indicated the negative relationship between reputation and stock under-pricing degree and their long-run underperformance. However, domestic analysis did not draw a unified conclusion for the difference of research periods and methods. Secondly, the paper chooses the new share data issued in A share market from July,2009to December,2010to do empirical analysis. The research methods include descriptive analysis, one-way analysis of variance and regression analysis. one-way analysis of variance shows that the firms underwritten by first level underwriters and second level underwriters are almost the same and of high quality, which are better than those underwritten by third level underwriters. The result of regression analysis passes the test of significance but with lower degree of fitting. This indicates that during the implementation period of sponsor mechanism, Chinese underwriters have formed the preliminary reputation mechanism.The research results show that it is still necessary to introduce further rules and regulations to enhance the formation of reputation mechanism. Firstly, strengthen supervision and intensify the punishment of illegal phenomenon of underwriters so as to improve the sponsor mechanism. Secondly, form a market-oriented underwriter reputation mechanism and help investors to form long-term prospection. Finally, improve relative mechanisms, making the responsibility between sponsors and underwriters clear and assuring the smooth operation of sponsor mechanism.