Abstract: Domestic and foreign researchers usually use the degree of IPO under-pricing and the comparison with mature market to measure the rationality of IPO pricing. In fact, this method doesn't quite suit to the Chinese stock market. In this paper, we analyze the rationality of IPO pricing through the explaining ability of the main components of value variables to prices. Additionally, empirical analysis in each phrase is conducted to test the performance of pricing system reform. The results show that the IPO price in Chinese A-share market generally reflects more corporate intrinsic value than the secondary market price, the main reason of the high degree of IPO under-pricing lies in the over high secondary market price, and the imperfect performance of the market pricing system reform relates more to the timing chosen than to the system itself.

Keyword: Degree of IPO under-pricing; Rationality of IPO pricing; Performance of pricing system reform; Main component analysis