IPO Pricing Efficiency in China： A ChiNext Board Focus  

作　　者：Qi Deng Zhong-guo Zhou 

机构地区：[1]Accounting and Finance Group, International Business School Suzhou, Xi'an Jiaotong- Liverpool University, Suzhou 215123, China [2]Department of Finance, Financial Planning, and Insurance, David Nazarian College of Business and Economics, California State University, Northridge, CA 91330-8379, USA

出　　处：《Frontiers of Economics in China-Selected Publications from Chinese Universities》2017年第2期280-308,共29页中国高等学校学术文摘·经济学（英文版）

摘　　要：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.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.

关 键 词：ChiNext IPO pricing UNDERWRITER offiine and online investors IPO Pricing Efficiency in China 

分 类 号：F832.51[经济管理—金融学] O182.1[理学—数学]