Research On Patent Innovation Competence And IPO Underpricing

IPO underpricing is a long-standing phenomenon in China’s financial market.Many scholars have carried out theoretical and empirical research on this.Information asymmetry theory is the main theory to explain IPO underpricing.The existing empirical research focuses on the impact of stock issuance mechanism,information disclosure,reputation mechanism,venture capital institutions and corporate governance on IPO underpricing in China’s securities market.There are few literatures on IPO underpricing from the perspective of patent innovation competence.The research of this paper not only enriches the literatures of IPO underpricing,but also helps enterprise managers pay more attention to the enterprise’s patent innovation competence,and investors can better understand the capital market and capital market supervisors can better supervise and manage.We study the impact of patent innovation competence on IPO underpricing by the non-financial and non-insurance enterprises listed in China’s A-share market from 2009 to 2012.And then introduce industry competition degree and risk investment as adjustment variables.The study found that the stronger patent innovation competence,the lower the degree of IPO underpricing.The main reasons are as follows:First,non-financial information about patent innovation competence reduces information asymmetry,thereby reducing financing costs.Second,the stronger the competence of patent innovation,will send more positive signals to investors,so that the issue pricing will be closer to its true value.Third,enterprises with strong patent innovation competence provide financial reporting information with higher transparency.This will not only reduce the information asymmetry,but also bring more visible information about new technologies and future growth opportunities of enterprises to investors.Furthermore,this will reduce the company manager’ moral hazard and adverse selection issues,to pass more positive signals.This article also found that this effect is more obvious in the enterprises with higher degree of industry competition.This is because investors more need non-financial information to reduce information asymmetry when they face higher levels of industry competition.So the effect of reducing information asymmetry in such enterprises is in the better performance,and financing costs are lower.Further research has found that venture capital participation can weaken the impact of patent innovation competence on IPO underpricing in enterprises with stronger patent innovation competence.Based on Grandstanding hypothesis,venture capitals may carry out patent whitening to help enterprises to speed up IPO.This will increase information asymmetry,thus increasing the cost of financing.However,this regulatory role is not significant in the enterprises with weak patent innovation competence.Maybe because the number of patents that companies with weaker patent innovation competence disclose is small.So investors believe that the possibility of venture capital whitewash patent is low.Based on the findings,we make recommendations.Business managers should focus on enhancing the company’s patent innovation competence and strengthening the disclosure of patent innovation competence to save the cost of issuance in the future,get sufficient financial support from the stock market,promote their own development and promote economic growth.Capital market regulators should strengthen the guidance to investors,make investors judge investment value based on the disclosed information by issuing corporation;strengthen innovative information’s disclosure requirements to improve the transparency of information on issuing enterprises;strengthen the supervision of venture capital industry to make venture capital play the role of supervision and certification,thus promote the good development of capital market.