Abstract
The IPO in China has been subject to the audit system, which imposes strict control over the pace of issuance of new stocks. The issuance of new stocks is relatively small, and there are also various restrictions on the issuance prices. High IPO underpricing rate and high turnover rate have always been unique to China’s new issue market. For this reason, this article begins with the causes of the high underpricing rate, and combines investor sentiment to study the effect of the new share issuance system on the IPO underpricing rate.
Highlights
The underpricing rate is used to measure the difference between the issue price and the closing price on the first day of the listing
This article begins with the causes of the high underpricing rate, and combines investor sentiment to study the effect of the new share issuance system on the IPO underpricing rate
The main issue studied in this paper is the formation of the underpricing rate, the underpricing rate =/issue price
Summary
The underpricing rate is used to measure the difference between the issue price and the closing price on the first day of the listing. China’s IPO underpricing has attracted many researchers. The structure of investors in China’s securities market is quite different from that of developed countries. After undergoing several major changes in China’s new stock issuance system, the level of marketization has significantly increased, significantly reducing the IPO underpricing rate. This paper hopes to examine the role of government, underwriters, institutional investors, and individual investors in the market during the development of the stock market in China in the past two decades and discuss the formation mechanism of the underpricing rate. I hope it meaningful for the reform of the new share issuance system in the future
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