An Empirical Study on the Rationality of GEM IPOs Pricing Based on SFA, Evidence from China

This paper employs stochastic frontier approach to do empirical study on the Rationality of GEM IPOs Pricing whether the offer price reach potential high price. According to the results, there is no significant evidence for offer price reaching its potential high. Meanwhile no evidence supports the founder has relation with the potential high offer price, the shares founder owned do not signal the ventures´ quality. While venture capital has positive relation with potential high offer price, for venture capital pursuing IPO success rather than firm growth. Moreover, we also find the ventures´ character for example size, proceeds from issues, and belong to new industry has positive relations with the potential offer price.