| The rule of law environment and judicial efficiency play an important role in financial development and economic growth.Creating a mature legal environment has always been the goal of countries all over the world.Since the 19th CPC National Congress,China’s legal construction has made breakthrough progress.According to statistics,there are 277 effective laws and 610 administrative regulations in China.After the promulgation of the civil code,other important laws are constantly revised and improved.Existing studies have shown that the level of rule of law has an important impact on the overall development of finance and enterprise management.In recent years,as an indicator of law enforcement,the level of law firms has played an important role in promoting information exchange between issuers and market participants.During the IPO,the issuer employs excellent law firms to convey high-quality information to market participants through the reputation effect of excellent law firms,enhance investors’ understanding of IPO companies and avoid emotional investment.At the same time,excellent law firms will disclose more information in their diligent investigation,which promotes the flow of information,improves the transparency of information,reduces the difficulty and the cost of information search,makes the company’s characteristic information fully reflected on the stock price,and provides an opportunity for IPO companies to reasonably price and improve the pricing efficiency of the capital market.As an important indicator of capital market pricing efficiency,high IPO underpricing and poor long-term market performance have always been hot topics in the field of finance.Compared with the western mature capital market,the characteristic information of IPO companies in the emerging capital market can not be fully reflected in the company’s stock value,resulting in the serious deviation of stock value from internal value,resulting in IPO underpricing.In addition,the long interval between the issuance time and the official listing of stocks in China increases the risk of investors.The high underpricing of IPO is a risk compensation for investors.At present,China’s capital market is in the stage of "emerging and transition".The information efficiency of the capital market is low,and the IPO underpricing "ranks firmly" in the forefront of the world.It is difficult to promote the healthy and stable development of China’s stock market and the effective allocation of capital market resources.Under the institutional background of gradually promoting the reform of stock issuance system,it is of great theoretical and practical significance to systematically explore the impact of the event that issuers employ excellent law firms in the process of IPO on IPO underpricing.This paper chooses excellent law firms employed by the issuer in the process of IPO as the research object,takes the listed companies in Shanghai and Shenzhen stock markets in China from 2007 to 2020 as the research sample,and uses OLS regression to explore the impact of excellent law firms employed by the issuer in the process of IPO on IPO underpricing.The structure of this paper is as follows:the first part is the introduction.Combined with national policies,this paper expounds the development trend of law finns,leads to the research background and significance of this paper,puts forward the research objectives and research contents,and finally summarizes the research methods and innovations;The second part is concept definition,the theoretical basis and literature review.Firstly,it introduces the relevant concepts and theoretical basis,then integrates the literature research of domestic and foreign scholars on the economic consequences of law firms and IPO underpricing,and comments on these literature;The third part is the institutional background and research assumptions.Firstly,it briefly summarizes the development process of law firms in China,then expounds the logic of the impact of excellent law firms employed by issuers in the process of IPO on IPO underpricing,and finally distinguishes the differences in the impact on IPO underpricing under different information environment,corporate governance level and legal environment;The fourth part is the research design.Firstly,it explains the selection of samples and data sources,then defines the main research variables,and finally establishes a regression model with reference to the existing literature;The fifth part is the empirical results and analysis.It includes descriptive statistics,single factor analysis,correlation analysis and multiple regression results analysis,and the results of multiple regression were tested by endogenous test and robustness test;The sixth part is the research conclusions and policy recommendations.This part draws a conclusion according to the empirical results,puts forward policy suggestions,and points out the limitations of this paper.The results of this paper show that:(1)the issuer’s employment of excellent law firms in the IPO process reduces the IPO underpricing by 6.6%,which is still robust after controlling the endogenous problem.(2)In the case of poor IPO information environment,the issuer’s employment of excellent law firms has a more significant impact on IPO underpricing.Specifically,through employing excellent lawyers,issuers can transmit enterprise value information to the capital market,enhance analysts’ attention and research on enterprises,make the company’s characteristic information quickly reflected in the stock price,and significantly reduce the IPO underpricing of local listed companies.(3)In the case of poor IPO corporate governance,the issuer’s employment of excellent law firms has a more significant impact on IPO underpricing.Specifically,excellent law firms can have an insight into the deficiencies in the process of corporate governance in their due diligence,and provide legal services,which makes IPO companies improve their corporate governance structure and significantly reduce the IPO underpricing of local listed companies.(4)In the case of poor legal level of IPO companies,the issuer’s employment of excellent law firms has a more significant impact on IPO underpricing.Excellent law firms improve the law enforcement efficiency of the region,which provide more perfect legal services for IPO companies,so as to reduce IPO underpricingFrom the perspective of excellent law firms employed by issuers,this paper provides a useful supplement for the research on the formation mechanism of IPO price in China,reveals the role of the level of excellent law firms in the capital market,improve the pricing efficiency of the capital market,and promote the healthy and stable development of the stock capital market. |
