Network Centrality Of Lead Underwriter And IPO Quote Revision

The development of Chinese economy has been focused on increasing financing support,alleviating indirect financing pressure,and supporting privately-owned enterprises.With the development of Science and Innovation(Kechuang)board,IPO companies have been the core of concern of the capital market.During the entire IPO procedure,the lead underwriter plays the role of counselling during IPOs,acting as the guide of enterprise capitalization.Under the background of China’s constantly changing IPO issuance policies,IPO quoting system and inquiry targets,it is critical to explain the motive of underwriters to revise IPO price,because IPO quote revisions reflects the pricing power of inquiry targets and results of enterprises’additional information release and catalysis of profits from multiple sources.This paper includes the following sections:First,influence mechanisms.The underwriter cooperation network is constructed based on the lead underwriter network centrality,while display characteristics of the underwriters.Based on informational theory and social network theory,this paper extracts the value of underwrite network centrality and discusses how it affects IPO quotation price revision combining IPO quoting procedures and factors that affect IPO quotes.Second,research design and empirical research.Based on China’s publicly listed A stocks from 2005 to 2017,this paper employs quantitative analysis and time series analysis,which stems from three perspectives:including issuers’ underwriters’ and investors’Next,a regression model is constructed to empirically verify the effect of underwriter network centrality on IPO quote revisions,validating the profit motive and information influencing mechanisms through setting a cross term of network centrality,information variable and underwriting expenses.Third,discussion.Focusing on the expansion of inquiry targets in 2014,this paper discusses the heterogeneity effect of lead underwriter network centrality under different conditions.Furthermore,a two-step regression model and comprehensive robustness indices are used to reduce endogeneity.In conclusion the empirical studies suggest that the higher network centrality,the lower changes of IPO quote revisions occurring and less the revision amount,with a tendency of increasing IPO quote prices.The analysis of the influence mechanism suggests that high underwriter network centrality leads to better ability to gather and transmit information increasing the accuracy of IPO quotes.The feverous Chinese IPO markets pushes underwriters to upwardly adjust IPO prices to gain more underwriting fees,but the constraints to maintain their reputation will lead to a decrease in this upward adjustment.A further analysis discovers that the expansion of inquiry targets in 2014 increase the marketization level and weakened the effect of network centrality on IPO quote revisions,by reducing the dependency of IPO quotes on lead underwriters.Lead underwriter network centrality exhibits a significant effect on IPO quotes of companies that are privately-owned,strong differences of opinions,weak underwriting abilities and high market sentiment.This paper clearly demonstrates the logical relationship between lead underwriter centrality and IPO quote revisions,illustrating the influence mechanism.This paper acts as a significant reference to formulating IPO related policies,accelerating IPO quote marketization,constraining underwriters’ code of conduct,and implementing a public,open and transparent capital market.