This paper examines what determines the offer price for a ChiNext IPO and discusses how we can improve the current ＂Chinese-style＂ bookbuilding process. We establish that the ChiNext IPO underwriter relies upon the ...This paper examines what determines the offer price for a ChiNext IPO and discusses how we can improve the current ＂Chinese-style＂ bookbuilding process. We establish that the ChiNext IPO underwriter relies upon the institutional investors to discover the issuer＇s intrinsic value （in the form of a preliminary price）, and that the same underwriter adjusts the preliminary price to establish the final offer price, based on its assessment of the institutional investors＇ motivations. Since the underwriter does not have discretionary power in new share allocation, this ＂Chinese-style＂ bookbuilding process contains certain pitfalls from an information asymmetry standpoint. The institutional investors mainly use ＂simple and direct＂ variables that do not adequately reflect the issuer＇s true intrinsic value to develop the preliminary price, while the underwriter adjusts that price downward to establish the offer price to clear the market, as a measure to counter a perceived free-rider issue among the institutional investors. This process, in effect, contributes to initial IPO underpricing and causes principal-agent conflicts between the underwriter and the issuer. We argue that such a pricing inefficiency could be improved by an innovative ＂bookbuilding plus price discretionary auction＂ process, which is a combination of the modified OpenlPO and Taiwan-style auctioned IPO approaches.展开更多
Recently, IPO (Initial Public Offering)has seen great change in China. This shift resulted in significant reformation in the way of operation for domestic investment bank. In the future competition for IPO market amon...Recently, IPO (Initial Public Offering)has seen great change in China. This shift resulted in significant reformation in the way of operation for domestic investment bank. In the future competition for IPO market among investment banks, the refined pricing ability will stand for the winner as prerequisite. As a kind of discussion on IPO pricing, this paper begins with how the reasonable IPO price is being worked out from three layers: the evaluation of stocks, the equilibrium of price and the formation of the final price. On this basis, we summarize and analyze the process of the reform of domestic IPO. Finally, we give some suggestions on this problem for further reform. Key words IPO pricing - reform - market environment展开更多
In the context of China’s drive to alleviate poverty,we focus on the initial public offering(IPO)firms located in China’s poor counties and investigate their IPO pricing and post-IPO performance.Contrary to the find...In the context of China’s drive to alleviate poverty,we focus on the initial public offering(IPO)firms located in China’s poor counties and investigate their IPO pricing and post-IPO performance.Contrary to the findings reported for the U.S.,we find that the problem of information asymmetry between Chinese firms located in rural areas and their investors is so severe that these IPO firms are associated with significantly higher underpricing.This effect is more pronounced for firms located in rural areas with poor traffic systems.We do not find significant market performance differences between rural and urban firms after their IPOs,but the operating performance of rural firms improves in the short term.Our additional analyses indicate that rural IPO firms have significantly lower investor attention and higher agency costs than urban firms.Overall,we enrich the literature on IPO pricing and the economic effects of geographic location.展开更多
文摘This paper examines what determines the offer price for a ChiNext IPO and discusses how we can improve the current ＂Chinese-style＂ bookbuilding process. We establish that the ChiNext IPO underwriter relies upon the institutional investors to discover the issuer＇s intrinsic value （in the form of a preliminary price）, and that the same underwriter adjusts the preliminary price to establish the final offer price, based on its assessment of the institutional investors＇ motivations. Since the underwriter does not have discretionary power in new share allocation, this ＂Chinese-style＂ bookbuilding process contains certain pitfalls from an information asymmetry standpoint. The institutional investors mainly use ＂simple and direct＂ variables that do not adequately reflect the issuer＇s true intrinsic value to develop the preliminary price, while the underwriter adjusts that price downward to establish the offer price to clear the market, as a measure to counter a perceived free-rider issue among the institutional investors. This process, in effect, contributes to initial IPO underpricing and causes principal-agent conflicts between the underwriter and the issuer. We argue that such a pricing inefficiency could be improved by an innovative ＂bookbuilding plus price discretionary auction＂ process, which is a combination of the modified OpenlPO and Taiwan-style auctioned IPO approaches.
文摘Recently, IPO (Initial Public Offering)has seen great change in China. This shift resulted in significant reformation in the way of operation for domestic investment bank. In the future competition for IPO market among investment banks, the refined pricing ability will stand for the winner as prerequisite. As a kind of discussion on IPO pricing, this paper begins with how the reasonable IPO price is being worked out from three layers: the evaluation of stocks, the equilibrium of price and the formation of the final price. On this basis, we summarize and analyze the process of the reform of domestic IPO. Finally, we give some suggestions on this problem for further reform. Key words IPO pricing - reform - market environment
基金financial support of the National Natural Science Foundation of China(71902187)the Fundamental Research Funds for the Central Universities at the Zhongnan University of Economics and Law(202111146)
文摘In the context of China’s drive to alleviate poverty,we focus on the initial public offering(IPO)firms located in China’s poor counties and investigate their IPO pricing and post-IPO performance.Contrary to the findings reported for the U.S.,we find that the problem of information asymmetry between Chinese firms located in rural areas and their investors is so severe that these IPO firms are associated with significantly higher underpricing.This effect is more pronounced for firms located in rural areas with poor traffic systems.We do not find significant market performance differences between rural and urban firms after their IPOs,but the operating performance of rural firms improves in the short term.Our additional analyses indicate that rural IPO firms have significantly lower investor attention and higher agency costs than urban firms.Overall,we enrich the literature on IPO pricing and the economic effects of geographic location.
