Nature Of Property Right, Earnings Quality And The Choice Of Securities Sponsors In IPO Companies

China’s securities market is an emerging market, which is embedded in the transformation of China’s economy. Dual characteristics of emerging and transition lead that the government’s behavior has an important influence on the allocation of resources in China’s securities market. Driven by its own interests, local government will help local companies to improve performance through tax cuts and subsidies and tax rebates, in order to meet the state council regulatory department’s qualification for IPO and SEO rights. Local government’s supporting for the IPO companies not only can inhibit the local capital outflow, but also attract the rest money to local, thus forming the phenomenon of earnings management with Chinese characteristics.Our country implemented the sponsor system is to establish important exploration of market restraint mechanism, whether it can take "roots" in the Chinese securities market has yet to be the test of time. In recent years, with the development of the sponsor system, there is a fierce competition for IPO customer between sponsors in China’s IPO market. Sponsor agencies mainly rely on the relationship between the IPO customers to get the business. To protect the development of the local agencies, local governments often use control convenient to require IPO companies choosing the local sponsor, so "home" and "shotgun" phenomenon frequently appear in the sponsor business.So far, sponsors’ reputation mechanism is the main problem of domestic and foreign research, the study of sponsors’ "territorial" characteristics is also in the minority. Combined with China’s specific national conditions, this paper is based on the study of the relationship between IPO firms’ property rights, earning quality and the choice of sponsor, the economic consequences of different choice, in the perspective of government. Through analysis the related theoretical of causes of this phenomenon, the research refers results of scholars at home and abroad, at the same time. This article selects IPO companies listed between January 2004 to October 2004 on the Shanghai stock exchange and shenzhen stock exchange market as the research sample, from the two angle of how the different earnings quality IPO companies and different nature of property rights IPO company to choose sponsors, revealed the local government having an influence on the listed company and the sponsor in the process of IPO, and then analyzed the different options’ performance of the IPO in the primary market and secondary market after company listed, providing empirical evidence for IPO highly under pricing at the first day and weak for a long time phenomenon in China’s IPO market. Concrete analysis shows that the local state-owned nature and poor earnings quality companies tend to choose local securities company sponsors at the time of the IPO; And after listed, companies choosing the local securities company sponsors have a higher IPO under pricing at the first day and more vulnerable for a long time than companies that choose different securities sponsors. It shows that the IPO companies and securities sponsors are affected by the local government in the process of IPO; however, this makes the market value of the shares deviating from its true value, harms the interests of small and medium-sized investors.