Research On The Influence Of The Prospectus Text Information Characteristics On IPO Underpricing

Prospectus is an important way for investors to obtain information about the listed IPO company,and contains a lot of legal,business,financial and other information.It is not only the core and important legal document for the success of the company’s listing,but also provides a key basis for investors to make value judgment and investment decision.Therefore,the objectivity and adequacy of prospectus information disclosure are closely related to the efficiency of capital market allocation.Moreover,the prospectus is not as strictly constrained as quantitative data information in disclosing qualitative textual information,which provides issuers with the opportunity to use textual manipulation to induce investors to invest blindly,And it ultimately leads to a high level of IPO underpricing.The same is true for the STAR market,which serves science and technology innovation enterprises.As of the end of 2021,the average IPO underpricing on the first day of 358 new stocks listed on the STAR market was 178%.Therefore,it is important to research the influence of the text information characteristics of the prospectuses of proposed companies listed on the STAR market on the IPO underpricing,which is of great practical significance for improving the basic system of China’s capital market and comprehensively building a modern financial system.Based on this,this paper conducts a study on the prospectus texts of companies listed on the STAR market from 2019 to 2021,fully explores the information in prospectuses by using Python natural language processing(NLP)techniques,and systematically explores the impact of prospectus text information features on IPO underpricing at three levels: text similarity,text readability,and text tone.In addition,this paper also analyzes the heterogeneity from the perspective of institutional investors’ shareholding ratio,and groups the samples by year in further analysis.The results show that the text similarity and net positive tone of prospectuses positively affect IPO underpricing,while the text readability negatively affects IPO underpricing,and the shareholding ratio of institutional investors plays a weakening role in the relationship between text information characteristics and IPO underpricing.Further study finds that with the continuous improvement of the information disclosure,the degree of weakening of the relationship between institutional investors’ shareholding and IPO underpricing gradually increases.This paper enriches the research results on the measurement of the characteristics of Chinese financial texts,and expands the research on the economic consequences of the disclosure of prospectus text information on the STAR market from the perspective of IPO underpricing.The findings of this paper have implications for strengthening the regulation of textual information disclosure system and improving the rational investment ability of investors.