| Growth enterprise market (GEM) in China has gained widespread attention since its establishment in2009. Aiming at serving enterprises with "two high and six new"(high technology, high growth, new economy, new service, new energy, new agriculture, and new pattern) characteristics, GEM has provided small and medium-sized enterprises a good platform for financing. Compared with NASDAQ stock market, the role that GEM plays in Chinese capital market is similar, as both two markets mainly serve the high-tech enterprises. As a result, GEM and NASDAQ are comparable in the market property and the corporate evaluation method. However, since the establishment GEM is confronted with three problems, i.e., high initial offering price, high initial public offering (IPO) price-earning ratio, and large amount of financing. The IPO price-earning ratio is significantly higher than that of NASDAQ stock and Chinese main board. Due to junk stock and the over-valued IPO, GEM has become a hot spot in the academic and investment communities, and a new IPO system reform is urgently needed. Considering the maturity of NASDAQ stock market, its successful experience could be set as an exemplary for GEM. Therefore, this study aims to analyze the determinants and mechanism of IPO pricing between GEM and NASDAQ, providing policy implications for GEM. Base on IPO price-earning ratios in two markets from2009to2012, a multi-factor model was proposed with sixteen indicators, such as return on equity (ROE), earning per share (EPS) and investment bank prestige. The results indicated that the IPO price-earnings ratio between GEM and NASDAQ was indeed affected by different indicators like finance conditions and external IPO-related factors. Considering these differences, improvements of GEM should be devoted to information disclosure system, development of investment banks’market influence, and the reduction of speculation. |
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