Research On The Influencing Factors Of IPO Underpricing In China 's Capital Market From The Perspective Of Information Asymmetry

IPO underpricing is a common phenomenon in the global stock markets.This phenomenon shows different characteristics in various countries, which in China performs a very high return rate at the beginning of initial public offering. The highdegree of IPO under-pricing would not only induce rent-seeking activities and irrational investment behavior, but also weaken captital allocation function of captital market, which is a potential threat to the development of the Chinese stock market. Foreign scholars have made a comprehensive study on this phenomenon, but because China’s capital market has big differences with Western markets, therefore if the Western theories can explain the phenomenon of IPO underpricing or not need to be inspected.This study discusses the relation between volatility of initial returns and degreeof asymmetric information of IPOs in China during 1990~2014. We use the firm andoffering-specific characteristics as proxies for asymmetric information to analyzewhether they affect initial returns and volatility of initial returns. Furthermore, whatthe relation between initial returns and volatility of initial returns is when the higherdegree of asymmetric information. Empirical results indicate that if an IPO firm istraded on the OTC market and young, it would have higher volatility of initial returns.Therefore, a firm with higher degree of asymmetric information, because it is more difficult for investors and underwriters to value the IPO stock, its volatility of initialreturns would be higher. And there exists a positive relation between initial returnsand volatility of initial returns from the overall sample trend.