Research On The Effect Of Registration System On IPO Pricing Efficiency In The Growth Enterprise Market

Compared to developed markets,the phenomenon of underpricing in Chinese IPOs is more pronounced.Since the establishment of the Chi Next in 2009,the most obvious phenomenon has been the irrational and high underpricing of IPO prices,as well as the exaggerated rise on the first day of listing,which has caused prices and valuations to deviate from normal.The effectiveness of IPO prices depends on the quality of the overall capital structure of the securities market.The registration system for the Growth Enterprise Market(GEM)was implemented on August 24,2020,and new regulations have been made in terms of issuance,pricing,trading,and exit systems,which are conducive to shorter approval time for new stock issuance on the GEM and more market-oriented IPO pricing.It is worth exploring whether the phenomenon of underpricing has been improved in actual market conditions.Although scholars at home and abroad have conducted extensive research,there is still no consensus on the measurement of IPO pricing efficiency.Currently,the first day return on the above market is generally chosen as the standard for IPO underpricing,and the first day return on listing includes both underpricing and premium.The premium is mostly caused by the irrational behavior of investors on the first day of issuance,so it is not appropriate to choose the first day return as the evaluation method for underpricing,This article uses the closing price on non limit up days to measure the IPO underpricing rate.The research content of this article is the impact of registration system on IPO pricing efficiency and the specific impact path behind it.In order to investigate the effectiveness of the implementation of the registration system on the changes in IPO price effects,we will choose to conduct double difference theoretical research and empirical analysis on the data of companies listed on the Chi Next and Main Board from August 24,2018 to August 24,2022,in order to explore the role and pathways of registration system reform on IPO price effects.(1)Through empirical analysis and research on the effect of registration system reform on IPO price effects,the explanatory variable is IPO underpricing rate,The explanatory variable is whether the registration system is implemented or not,and through studying other influencing variables,it proves hypothesis 1: registration system reform can improve IPO pricing efficiency,and at the same time,it uses heterogeneity analysis and robustness test to enhance the preciseness of empirical research conclusions.(2)The intermediary mechanism test of the impact of registration system on IPO pricing efficiency is conducted from two paths: information disclosure quality and investor sentiment,to verify hypothesis 2 and hypothesis 3.The results of empirical research have found that:(1)there is a negative correlation between registration system and IPO underpricing rate.The implementation of the registration system can greatly reduce the IPO underpricing level of listed companies on the Chi Next board,thereby improving the efficiency of IPO pricing.Looking at different regions,the eastern region has a more significant impact compared to the western and central regions.(2)The registration system mainly affects the efficiency of IPO pricing through two paths:information disclosure and investor sentiment.On the one hand,the registration system reduces the bias of analysts in predicting stock prices,increases the shareholding ratio of executives before going public,improves the quality of internal and external information,and thus reduces the IPO underpricing rate.On the other hand,the implementation of the registration system has led to a higher turnover rate for investors on the first day of listing,a lower winning bid rate for online issuance,and investors no longer blindly trust the new stock issuance market,which is conducive to promoting the improvement of IPO pricing efficiency in the secondary market.(3)In analyzing the heterogeneity test of different enterprise properties,compared to state-owned and foreign-funded enterprises,the registration system has a more significant impact on the IPO underpricing rate of private enterprises.The registration system mainly improves the IPO pricing efficiency of private enterprises.Based on the above conclusions,this article proposes corresponding policy recommendations:(1)Adhere to the registration system and improve the inquiry pricing mechanism.The registration system has improved the efficiency of IPO pricing to a certain extent,so it is necessary to continue to adhere to the registration system,continuously improve the inquiry system for new stock issuance,strictly regulate the sentiment of institutional investors,and promote more rational IPO pricing;(2)Improve the information disclosure system and improve the quality of independent information disclosure.Refine necessary disclosure matters and guide the company to independently disclose;(3)Intensify criminal penalties and increase the cost of violating the law.To avoid illegal activities of listed companies,a legal approach of "administrative penalty、civil compensation and criminal penalty" is adopted;(4)Improve the delisting system and standardize the development of the Growth Enterprise Market.Adopting diversified exit channels,making the normalization of delisting a trend;(5)Strengthen investor education and enhance risk prevention awareness.Strengthen investors’ awareness of risk prevention and rational investment behavior,and self identify good and bad stocks in the stock market.