An empirical analysis of the IPO underpriced in Chinese A-share market

Abstract

Initial public offering (IPO) is a hot topic in stock market especially in China, due to Chinese IPO market is a new market with 20 years. However, in this developing market, IPO always under-priced which means the share jumps to a high share price on the first issuing day. This research will find out why this happening and make some recommendations to improve Chinese IPO market, Chinese A share market will be used to collect sample. In this report, it will mainly contain three parts. Firstly, literature review, it will talk about why firms choose to go public and analyze why IPO underprice depending on some hypotheses. Secondly, data collection, the sample is collected from Chinese A-share market, sample size is 100 stocks in 2012. And also will discuss the connection between the dependent variable and independent variables by using ordinary least square (OLS) multiple regression analysis. Then end with conclusion and recommendation. This part will discuss why IPO always underprice in China depending on research findings, also make recommendations for those who might relevant with IPOs, such as investors, managers and government.