Grey relational analysis of factors affecting ipo pricing in China a-share market

Abstract

IPO (Initial Public Offerings) pricing is a systematic and complicated task that directly determines whether the capital market is able to function in a healthy way. As China's stock market goes through ups and downs, China Securities Regulatory Commission generally adopts a positive strategy. Therefore, to weaken the policy factors, 48 cases of IPO companies dated from January 2014 to February 2014 (before price guidance of 23x P/E ratio ceiling) are selected as samples and an approach of grey relational analysis is adopted to analyze the degree on which different factors are able to have an influence. The results show that in general, internal enterprise value factors are likely to play a more important role when compared with external environmental factors. More specifically, profitability, growth potential, operating efficiency, industry characteristics, solvency, capital scale and structure are factors that are more influencing on the offering price, while the market overview and individual stock overview are ones that play a less important role. Based on these results some policy suggestions with regard to IPO pricing are also offered.