Sponsor Co-investment, inquiry divergence, and IPO pricing efficiency

Abstract

This paper measures the initial public offering (IPO) pricing efficiency of China's Sci-Tech Innovation Board and the growth enterprise market under the registration-based IPO system, with a novel focus on the mandatory sponsor co-investment system. Our findings reveal that this system improves IPO pricing efficiency and is crucial in mitigating capital constraints, overshadowing the influence of sponsor reputation. Additionally, the co-investment ratio reduces inquiry divergence among institutional investors, enhancing pricing efficiency. This study provides new insights into China's evolving IPO market dynamics and its regulatory mechanisms.