Institutional Investor Heterogeneity and Initial Public Offering Underpricing in China's Science and Technology Innovation Board: A Review (Journal of trends in financial and economics.)

Summary

• Bushee established a systematic classification of institutional investors using 3 types of indicators and 9 constructed variables.p.2
• Stable institutional investors reduced equity costs in Chinese high-tech firms from 2008 to 2017 more effectively than transactional investors.p.3
• Analysis of registration statements from 193 companies listed on the STAR Market from June 13, 2019, to January 31, 2021, revealed that redundant disclosures exacerbate underpricing.p.4
• A synthesis of 31 references evaluated Chinese IPO pricing efficiency across historical regulatory transformations.p.6
• Publicly available information accounts for only 35%-50% of observed IPO underpricing.p.7
• Empirical bidding data across 380 Chinese IPOs indicates that higher investor sentiment drives institutional participants to raise bid prices.p.7
• An examination of 2955 Chinese A-share listed stocks from 2003 to 2020 demonstrated that positive investor sentiment affects IPO underpricing via market turnover rate.p.9

Key insights

1. Transaction-oriented institutional investors exert a more pronounced impact on IPO underpricing than long-term stable investors.p.1
2. Pressure-resistant investors significantly enhance internal control effectiveness and firm investment efficiency compared to pressure-sensitive investors.p.3
3. Registration-based IPO systems reduce post-listing speculation by accelerating the release of investor sentiment.p.4
4. Patent ownership produces a strong signaling effect that effectively mitigates IPO underpricing for innovation-focused companies.p.5
5. Registration system reforms enhance IPO pricing efficiency by elevating corporate disclosure quality and diminishing information asymmetry.p.6
6. Low-price collusion among inquiry objects occurs when regulatory enforcement defaults to lenient supervisory conditions.p.7
7. Removing first-day price fluctuation limits and introducing margin trading on the STAR Market curbs speculative sentiment.p.9