32. The Reform of IPO Bookbuilding Mechanism and IPO Anomalies in China Stock Market: Evidence from the Bidding of Institutional Investors

After the reform of IPO bookbuilding mechanism in China stock market at 2009, the IPO anomalies called “3-high”, including high issuing price, high PE, and high funding, are very serious, and wealth allocation is unfair during this procedure. This paper studies such problems from the perspective of institutional investors’ biddings during IPO bookbuilding. We find that after the reform, unreasonable arrangement of IPO bookbuilding mechanism results to the over-competition among institutional investors, which further causes to IPO over-pricing and the problem of “3-high”. This research opens the “black box” of IPO bookbuilding and IPO pricing procedure to some extent. Based on this research, we suggest optimizing the incentive and constraint mechanism of institutional investors further to make the competition more reasonable, to improve the IPO pricing efficiency and the fairness during wealth allocation.