Research On Changes Of New Share Pricing After Reform Of New Share Issuance System

In June 2009,CSRC first promulgated the Opinion on Further Reform and Perfection of New Share Issuance System,which signifies the activation of a new round of reform on new share issuance system.The fundamental ideology of the reform is to liberalize pricing and window guidance and observe the principle of offer price being determined by the capital market itself.Taking into consideration of the complexity involved in the reform itself,the idea of phased reform is developed.Afterwards,in November 2010,CSRC promulgated the Guiding Opinion on Intensifying Reform of New Share Issuance System and officially activated the second phase reform of new share issuance system.The under-pricing of IPO is further controlled on the basis of price inquiry mechanism and a higher level of market-oriented pricing of new shares is achieved.New share issuance system is an important mechanism that restricts the participating entities namely issuer,lead underwriter and investor institutions in the primary market.The promulgation of new issue issuance system is aimed at restricting the behavior of different participating entities in the market.This article aims at reviewing the relevant effectiveness of second phase reform of new share issuance system,which is examined by analyzing the subscription and pricing behavior of price inquiry participants and lead underwriter.Through data analysis and experimental testing,it is found that the reform of new share issuance system has significant impact on subscription and quotation of offline price inquiry investors and pricing of lead underwriter.For price inquiry investors,their response to offline subscription after second round reform,which are evidenced by the average number of participated portfolios and average subscription amount,obviously dropped following the subsequent reform.Also,the decrease in subscription amount is especially obvious among fund companies.The concentration of overall quotation of price inquiry investors has apparently increased,especially among fund companies and recommended investors.The result of quotation of price inquiry investors is mostly relevant to maximum price of investment valuation report of lead underwriter and the reported growth rate of estimated earnings.For lead underwriter,after the second phase reform,the average P/E corresponding to IPO price is higher than that of first phase.At the same time,the coverage of price inquiry portfolios decreases.The allocable opportunities of offline investors significantly surges.The offering price difference by which the final price exceeds the weighted average price of offline subscription is obviously enlarged.Furthermore,the pricing of lead underwriter has positive correlation with maximum price of investment valuation report and the estimated growth rate of earnings.Basing on this,the article makes suggestions to the relevant reform in the final part from the perspective of information disclosure and incentive mechanism,pointing out that by reducing asymmetric information between buy side and sell side,saving transaction expenses,reasonable pricing of IPO is expected to be achieved.Also,IPO pricing system is able to be optimized through the rationalization of incentive mechanism of each participating entity in the IPO pricing process.