A Study on the Collusive Behavior in Book Building Mechanism, Institutional Investors’ Bidding Behavior and IPO Performance

Based on the Chinese IPO book building mechanism as the background, the paper chooses the market-oriented period (from November,2010 to April,2012) of the IPOs as the samples, and studies the relationship between the collusive behavior, institutional investors’ bidding behavior and underwriters’ pricing strategy(as well as the post-IPO performance). The results show that: Firstly, in the case of the confusion contract, informed investors are likely to pretend to be emotional investors, which are defined as the collusive behavior between the informed investors and the emotional investors. Emotional investors are inclined to push up institutional investors’ bidding price, so the collusive behavior would push up the institutional investors’ bidding prices; Secondly, the underwriters would adjust the high bidding prices reversely which stem from the collusive behavior, the institutional investors’ bidding behavior investors play a complete (or partial) intermediary role in the relation between the collusive behavior and the underwriters’ pricing strategy; Thirdly, the collusive behavior influences the post-IPO performance negatively, and the institutional investors’ bidding behavior investors play a complete (or partial) intermediary role in the relation between the collusive behavior and the post-IPO performance.