Research on Relationship between “Direct Investment + Sponsor” Mode and IPO Pricing Efficiency

Abstract

The paper takes 996 IPO companies in China from 2012 to 2016 as samples and investigates the effect on IPO pricing efficiency under the “ Direct Investment + Sponsor ” Mode. The research shows that there is no significant dif ference between companies that intend to IPO under the “ Direct Investmen t + Sponsor ” mode and companies that intend to IPO under the non- “ Direct Investment + Sponsor ” mode in the discount of new stocks and one-year returns. The result shows that the firewall mechanism between the direct investment department and the investment banking department of Chinese securities traders is in good condition, verifies the rationality of not abolishing “ Direct Investment + Sponsor ” mode in Guidelines for Direct Investment Business of Securities Companies introduced by China Securities Regulatory Commission in July 2011 and powerfully refutes the market ’ s long-lasting query that China Securities Regulatory Commission retains “ Direct Investment + Sponsor ” mode. Meanwhile, it provides evidence for the existence compliance of “ Direct Investment + Sponsor ” mode with financial innovation made by securities traders on the occasion of introducing new policies such as Management Standards for Private Equity Subsidiaries of Securities Companies and Management Standard for Alternative Investment Subsidiaries of Securities Companies .