Abstract: China's IPO underpricing rate far exceeds the average level that of other markets, causing the capital accumulation to restrict the effectiveness of capital market. After the IPO restarted in early 2014, a new first-day suspension mechanism was introduced and enforced. Can this improve IPO underpricing level influence factor? To explore this topic, we use the mean of high and low prices on the first day of none-suspension of IPO to calculate the rate of underpricing. We find that after this mechanism being placed, the irrational factors, represented by release factors, affect the IPO underpricing level are decreased, which indicates the level of information in China's capital market has been improved, and the investment of new shares has become more rational.

Key words: IPO underpricing, The first-day of temporary suspension, first the suspension day after trading for many days