Analysis of the Impact of Investor Sentiment on IPO Underpricing: Perspective from GEM Manufacturing Firms

Abstract

The IPO phenomenon is a hot issue based on the financial field of listed companies. China has the phenomenon of IPO underpricing, and the underpricing of new shares in China is much higher than that in other countries. Unlike western countries, China's financial repression phenomenon is stronger, the financial environment is special, and there are more retail investors in China's stock market, which are more obviously influenced by emotions and have a strong herd mentality. IPO underpricing has more negative impact on China's capital market. This paper analyzes the reasons for investors' emotional frenzy on the first day closing price of GEM new shares listed from the perspective of behavioral finance. From the perspective of investor sentiment, this paper selects the proxy variables of investor sentiment in different levels of markets and uses multiple regression method to study the impact of investor sentiment on IPO underpricing. It is found that the winning rate is adversely connected with IPO underpricing, while turnover rate is positively correlated with it, and corresponding policy suggestions are put forward. The results in this paper benefit certain investors in the financial market.