Study on Chinese IPO inquiry mechanism and pricing efficiency

Author(s): Hu Zhiqiang, Gao Gengzi

By the GMM estimation methods, this paper discusses about factors that affect discount rate under the inquiry mechanism, including inquiry price range, price width, and the amount of institutional investors that participate in inquiry, as well as analyzing the relation between investor sentiment index variable success rate in the market and underpricing. The results of this paper show that the bigger the price width of inquiry price range, the higher the information uncertainty of institutional investors, and consequently the discount rate is higher; the more institutional investors participate in inquiry, the more sufficient the inquiry, and the information uncertainty is decreased so as to lower discount rate; when the success rate gets lower, the investors' passion is higher, and the discount rate gets higher

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