Geographical Relationships and Institutional Investors'Collusive Bidding:Empirical Evidence from IPOs of the STAR Market
The registration system is the key to comprehensively deepen the reform of the capital market.The launch of the STAR Market as a pilot for the registration system marks a crucial step towards market-oriented IPO issuance system in China.It gives the market more power in IPO pricing,lifting long-standing price-earn-ings ratio regulation,and largely entrusting pricing power to institutional investors.Regulators have high expectations for insti-tutional investors to play an active role in IPO pricing,but there is significant uncertainty about whether they can take on the respon-sibilities effectively.Institutional investors typically prioritize their own interests over IPO pricing efficiency,which is an incentive for opportunistic behavior.Instances where institutional investors participating in offline subscription change their bids frequently,make substantial alterations,or exhibit a high degree of consistency in their bids have raised deep suspicions across society regarding whether there is collusive bidding during the IPO issuance process on the STAR Market.Despite the significant attention from various sectors on the issue of institutional investors'collusive bidding during the IPO process of the STAR Market,and the regulatory authorities have gradually strengthened supervision of collusive bidding and other violations.In September 2021,adjustments were made to the IPO issuance system for the STAR Market.However,evidence provided by the academic community on this important issue is extremely limited.Does collusive biding by institutional investors exist?How has col-lusive biding changed with the increased regulation?What factors influence collusive biding?These are important unresolved issues.This paper examines the issue of institutional investors'collusive biding during the IPO process of the STAR Market.Due to the unique nature and requirements of collusive biding,researchers cannot directly observe or determine it.Instead,potential collusive bidding can only be indirectly captured and reasonably inferred.Therefore,the collusive bidding mentioned in this paper is essen-tially a suspicion.Generally speaking,if two or more institutional investors with some observable and explainable social relationships show abnormally high probabilities of having identical or similar bids,and after excluding some important alternative explanations,it can be reasonably presumed that there is a suspicion of collusive bidding.Given the importance of geographical relationships in China and the significant references provided by numerous research literature in measuring geographical relationships.This paper examines the issue of institutional investors'collusive biding in the IPO process of the STAR Market from the perspective of geographical relation-ships.The study finds that institutional investors are suspected of collusive biding based on geographical relationships.This result still holds after considering alternative explanations of information similarity,anchor point bidding,herding effect and other relation-ships.Further analyses show that after the strengthening of supervi-sion,the bidding patterns of institutional investors with geograph-ical relationships have changed,with a decrease in the frequency of identical bids and an increase in the frequency of similar bids,making it more difficult for regulatory authorities to monitor and pay attention to suspected collusive bidding.When the information environment of IPO companies is better,the suspicion of collusive bidding among institutional investors based on geographical rela-tionships is lower.The incremental contributions of this paper are mainly reflected in the following three aspects.First,the empirical research reveals institutional investors'suspected collusive bidding behavior based on geographical relationships,which not only addresses practical concerns but also promotes theoretical research.Second,from the perspective of geographical relationships,new factors influencing institutional investors'bids are revealed.Third,the findings of this paper provide empirical evidence of the practical effects of regula-tory enhancement,and helps regulatory authorities and investors to be vigilant about more covert forms of collusive bidding.
Geographical RelationshipThe STAR MarketIPOInstitutional InvestorCollusive Bidding
万方数据
维普
