Study On IPO Underpricing Based On The Game Behavior Between Underwriters And Issuers

China began to implement inquiry system from January2005, IPO marketappeared high underpricing phenomenon. China implemented the IPO reform in June2009, then the IPO market appeared “three high” phenomena and the situation of“break”. These phenomena reflect that the main participants of stock market regard theprocess of IPO pricing as a huge benefit-sharing or game process. After the IPO reform,the behaviors of underwriters and issuers have been released, the autonomy ofadjustments on the issue of price has increased. The issuer and underwriter become thenew main participants of the interest game. Based on the game behaviors ofunderwriters and issuers, the paper studies the IPO underpricing phenomenon of China’sstock market, it has important theoretical and practical significance.First, the paper conducts theoretical analyses on the behaviors of underwriters andissuers in the IPO pricing. Underwriters have the psychology of contradiction pricing,they have both high price motivation and low price consideration. Issuers seek themaximization of total funds raised, they hope that the issue price could be as high aspossible. Based on the theoretical analyses, the paper establishes a non-symmetricevolutionary game model between underwriters and issuers, and deduces theevolutionary stable strategy and the evolutionary stable state. Through the discussionsof the evolutionary stable state, the paper proposes two hypotheses: the issuers quality isnegatively correlated with IPO underpricing; the underwriter reputation is positivelycorrelated with IPO underpricing.The paper selects some factors affecting the IPO underpricing as the explanatoryvariables, and establishes an regression model which is significant. According to theresults of empirical study, the IPO market appears different characteristics under thenew and old inquiry system, some indicator variables have changed significantly, thesechanges reflect some effects of the IPO reform. The hypothesis that the issuers quality isnegatively correlated with IPO underpricing doesn’t have good validation, thehypothesis that the underwriter reputation is positively correlated with IPO underpricinghas been verified. In addition to the listed waiting period, the null hypotheses of the restvariables have passed significant test.