Research On The Impact Of Cancelling The First-Day Daily Limit System Of IPO Underpricing

After the implementation of the first-day price limit policy introduced by the Shanghai Stock Exchange and Shenzhen Stock Exchange at the end of 2013,it caused a continuous rise in the limit board in the secondary trading market.The surge in new stock prices in this form further stimulated new stock speculation,leading to higher actual IPO underpricing,which is contrary to the original intention of the policy.Therefore,since the establishment of the Science and Technology Innovation Board in2019,the basic system reform of both the Science and Technology Innovation Board and the Growth Enterprise Board has included the lifting of the limit on the rise and fall of the first five days after listing.But since the implementation of this reform,the first-day underpricing of the Growth Enterprise Market has significantly increased.Since the reform in 2020,the average first-day underpricing of IPOs has been about234%,and the average first-day underpricing in 2021 has been 218%.Has the lifting of the first-day price limit achieved the expected policy effect? This article focuses on the implementation effect of the policy of canceling the first day rise and fall limit on the Growth Enterprise Market,aiming to provide theoretical reference for the reform of IPO related systems.On the basis of reviewing literature on high IPO underpricing and price limit,this article theoretically analyzes the relationship between the cancellation of first-day price limit and IPO underpricing,as well as the specific role played by investor sentiment and opinion divergence.This article uses 366 companies on the Growth Enterprise Market from June 13,2014 to December 31,2021 as samples for empirical analysis,and sets policy dummy variables as the main explanatory variables.This article introduces the IPO underpricing rate as the dependent variable for regression,and the results showed that the lifting of the first-day price limit overall suppressed IPO underpricing,which is in line with the expected policy effect;This article also introduces the product term of investor sentiment and opinion divergence with policy dummy variables to study the impact mechanism of this policy on IPO underpricing.The results show that in the relationship between the lifting of the first-day rise and fall limit and IPO underpricing,investor sentiment and opinion divergence are positively correlated with the first-day underpricing.The lifting of the first day rise and fall limit reduces opinion divergence.Although investor sentiment is released without regulation,However,in cases where the degree of disagreement is low,the driving effect of emotions on stock prices is weakened,and the combined effect of the two suppresses IPO underpricing.Finally,the robustness test is carried out by replacing the construction method of IPO underpricing,removing the samples listed when the COVID-19 is more serious,and using the propensity score matching model to control the impact of endogeneity.The results also show that the removal of the first-day limit on price rises and falls inhibits IPO underpricing on the whole.Based on the previous research findings,this article proposes four policy recommendations for China to lift the limit on the first day rise and fall of new stock listings in other sectors,strengthen investor education,guide retail investors to entrust institutions with investment activities,and strengthen information disclosure.