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

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.