Explanation and Evidence for the Pricing of New Stock Issuances Based on Shell Resources

Author: Yang Dan
Publisher:
Publish Date: 2005-03-01
Features: The research objective of this book is to examine the existing methods for calculating the return on new stock offerings, test the degree of short-term underpricing and the lack of long-term overpricing of new stocks using large-sample tests, and provide a reasonable and consistent explanation for these phenomena using the special product of government regulation in China's securities market—the "shell resource." This aims to offer a theoretical foundation for the reasonable pricing of new stocks in China. Additionally, the book explores the rationality of government intervention in the pricing of new stocks, leading to the constraints for the success of market-oriented pricing reforms and providing references for the design of market-oriented pricing mechanisms. The book is divided into seven chapters. Chapter 1 serves as the foundation for the entire work; Chapter 2 systematically introduces the basic data and characteristics of new stock offerings in the United States, as well as those in China. Chapter 3 defines "shell resource," identifying it as the listing qualification of an issuing company. Chapter 4 conducts regression tests using sample companies listed before 2000 with complete data. Chapter 5 conducts a systematic study of the long-term returns of new stocks. Chapter 6 analyzes the process of introducing the approval system for new stock offerings in China and the performance of the value of shell resources under this system. Chapter 7 summarizes the pricing process of new stocks as a game and price discovery process involving four main entities: the government, the issuing company, investment banks, and investors. It points out that the current pricing of new stock offerings under administrative intervention results in a mixed equilibrium, where the issue price fails to reflect the quality of the company.