关键词: 律师事务所, IPO定价效率, IPO抑价, 声誉

Abstract: The phenomenon of high IPO underpricing and suboptimal long-term market performance has long been a focal point in financial discussions. In emerging capital markets, like those in China, the inability to fully reflect IPO companies’ idiosyncratic information results in significant deviations of stock value from intrinsic value, leading to IPO underpricing. The prolonged period between stock issuance and official listing further heightens investor risks, with high IPO underpricing acting as compensation for these risks. Given China’s current position in the “emerging and transitioning” stage of its capital market, characterized by low information efficiency, IPO underpricing consistently ranks among the highest globally. Addressing this issue is essential for promoting the healthy and stable development of China’s stock market and ensuring the effective allocation of capital market resources. Against the backdrop of ongoing reforms in the stock issuance system, this study systematically explores the impact of issuer engagement with top-tier law firms during the IPO process on underpricing.
The legal environment and law enforcement efficiency play pivotal roles in fostering financial development and economic growth. In recent years, the efficacy of law firms has emerged as a crucial indicator, measuring the level of law enforcement and facilitating information exchange between issuers and market participants. During IPO, the engagement of top-tier law firms by issuers transmits a high-quality signal to market participants, enhancing an investor’s understanding of the IPO company and mitigating emotional investment risks. Additionally, exemplary law firms contribute to increased corporate information disclosure, promoting information flow, enhancing transparency, and reducing the difficulty and cost of information searches. This, in turn, empowers IPO companies to set reasonable prices, improving capital market pricing efficiency.
This research focuses on issuers’ decisions to hire excellent law firms during the initial public offering process. The study utilizes OLS regression and considers listed companies on China’s Shanghai and Shenzhen stock exchanges from 2007 to 2020 as the research sample. The data on law firms are primarily sourced from the official website of the All China Lawyers Association and the China Lawyers Network. Micro-enterprise data are mainly obtained from the CSMAR database, CNRDS database, WIND database, and the Juchao Information website.The findings reveal that issuers engaging top-tier law firms during the IPO process reduce underpricing by 6.6%. Rigorous methods, including entropy balance and instrumental variables, are employed to address endogeneity issues, ensuring the stability of this conclusion. Furthermore, this paper conducts an in-depth analysis. The analysis of the mechanism of action indicates that top-tier law firms can enhance the quality of information disclosure for IPO companies, which in turn aids in improving the pricing efficiency of these companies. The results of the heterogeneity analysis indicate that the impact of law firms on IPO pricing efficiency is more significant in situations where the information environment is poor, or the levels of corporate governance or the rule of law are low.
In conclusion, this article offers a valuable contribution to the understanding of China’s IPO pricing formation mechanism, emphasizing the role of excellent law firms hired by issuers. By shedding light on the impact of law firms on the capital market and expanding the scope of intermediary reputation theory, the study enriches the intersection of law and finance. Ultimately, this research contributes to the enhancement of capital market pricing efficiency, fostering its stable and healthy development.

Key words: law firms, IPO pricing efficiency, IPO underpricing, reputation