Collusion of Institutional Investors,IPO Underpricing and Bidding Strategies

This paper studies the effect of institutional investors' collusion on the IPO pricing under the conditions of rational expectations of the institutional investors.We first give the bidding strategies of institutional investors in initial inquiry stage.Then,we give the issuer's optimal pricing strategies in bidding inquiry stage.The results show that the placement ratio,the quality of market information,the number of people participating in purchase,institutional investors' risk aversion and private information quality all influence the initial issue price;and the collusion of institutional investors is one of the reasons that causes IPO underpricing,to increase.We suggest that the issuers should reduce the effect of collusion on IPO pricing by controlling the proportion of placement.Finally,we test the results by comparing static analysis.