A study of impact on IPO pricing of auditors' reputation—Based on the empirical research of Chinese GEM companies

摘要

According to the Signaling Theory, excellent auditors have excellent auditing quality. The quality of accounting information from a listed company that hired an excellent auditor for its IPO auditing is more secure, hence favored by investors. This paper uses data from Growth Enterprises Market (GEM) listed companies as a sample, and establish an OLS multiple linear regression model to analyze the impact of auditor reputation and the IPO pricing of GEM listed companies. The results show that hiring a reputable auditors can improve the company's IPO issue price but cannot significantly affect underpricing of IPO. Overall, the auditor's reputation will have an important but relatively limited effect on the stock pricing. Thus, auditor's reputation needs further improvement. This paper empirically examines the relationship between auditor's reputation and IPO issue price as well as underpricing in China's GEM listed companies. It also enriches the scope of IPO study, which has a practical significance in reducing the current high-rate of IPO underpricing.