Customer Relationship Life Cycle, Customer Concentration And IPO Underpricing

IPO underpricing is a phenomenon that the new stock's first close price is much larger than the initial setting price.The article is based on the domestic and foreign literature,theoretical research and IPO issuance policy to keep studying the IPO underpricing from the sight of customer concentration.Empirical results show that there is the negative correlation between customer concentration and IPO underpricing,that is means customer concentration reduces the IPO underpricing.This result suggests that investors see a stable customer base for their businesses as a positive factor,thus,improving their acceptance for new stock's price.When the article distribute the sample into customers with the company's stock and customers without stock,the result show that in the customers with stock sample,customer connection is more significant to the IPO underpricing.This paper further constructs the variables of customer relationship life cycle using the company's top five customer sales share from 2014 to 2017 to study how the customers influence the IPO underpricing during different customer relationship life cycle,and found that customer concentration and IPO underpricing show inverted U-shaped relationship during customers relationship life cycle.During the customer relationship lifecycle creation period,enterprises will buy many specific asset to obtain customers' recognition,and this was perceived by investors as a risk factor,then investors give a low price to the new stocks.It reduces the recognition of the pricing of new shares in enterprises,and exacerbates the price of IPO underpricing.However,during the customer relationship lifecycle stabilization period,businesses can get a steady sales revenue from their customers,and this was trade as a good news,then investors give a high price to the new stocks,and this eases IPO underpricing.Then this risk-free arbitrage mode attract investors put much more money to the new stock distribution market,and then causing the mismatch between capital demand and capital supply.What's more,the new stock distribution market promotes the Stock circulation market's investors to push the price higher,sale frequently and hart the investors' Interests in the long time.From the microcosmic aspect,IPO underpricing increases the difficulty of financing the enterprise and harms the interests of investors.From the macroscopic aspect,IPO underpricing is not conducive to the rational allocation of a country's funds,which affects the adjustment of the economic development model.?The determining factor of the pricing of new stock issue lies in the value of the enterprise.That is enterprises' expected free cash flow at a certain level of risk according to the present value of a discounted rate.Based on stakeholder theory,the supply chain relationship between the enterprise and the customer makes each other a risk community.So customers concentration can affect the value of the business,in turn,it affects the price of new shares issued by enterprises.This gradual relationship between the customer and the enterprise has a more important impact on IPO underpricing than on underwriters,investors,and regulators.Based on the above research,the article Suggest enterprises to arise the overall consciousness and reduce the information asymmetry with investors.In particular,enterprises should have a holistic awareness with customers and establish an effective risk identification and an early warning mechanism.What's more,companies should actively carry out orderly exchange of information with investors,reduce the degree of asymmetry of information,and enhance investors ' recognition of the pricing of new shares.From the macroscopic point,regulators should strengthen the improvement of the new stock issuance system,reduce the possibility of arbitrage in the new issue process,establish a full and effective disclosure system,prove the steady development of securities market and facilitate the optimal allocation of funds,enhance the service capacity of direct financing to the economy.