ABSTRACT Initial Public Offerings (IPO) Underpricing, is the increase in stock value from the initial offering price to the first-day closing price. It is a universal phenomenon in the world and has attracted much attention from worldwide Many empirical studies have found that IPOs are, on average, 10% in the world recognized mature capital markets in United States, 15% for the other developed countries and almost 60% for developing countries. However, it is higher than 200% in China. Not only compared with the developed countries, but also the same leveled developing countries or regions, China appears much more serious situation and is titled as "stock myth". Moreover, with the new shares issued underpricing phenomenon, high IPOunderpricing makes companies to afford expensive invisible cost for floatation of shares, and meanwhile results in reducing the investment amount greatly. The impression of the enterprise is damaged and the financing efficiency of capital market is slowed. From the long-term consideration, high underpricing will inevitably lead that capital flows into the primary market, increase the market speculative factors, make the stock market allocation of resources and reduce the financing function. Absolutely, it will seriously affect the normal development of the stock market, and become the major problem of Chinese stock market. Especially effected by Chinese special policy factors, separation" has a significant effect to underpricing issue. To solve this problem, the Chinese authorities have launched a structural reform program. Since 1992, Chinese securities market has opened and improved in the direction of marketization. Although IPO underpricing has significantly reduced, it is still in a relatively high level. On June 19, 2006, "the Chinese international" listed in Shenzhen stock exchange, marking that IPO has restarted after more than one year suspension. And a new era of full circulation of the Chinese stock market is begin. Since non-tradable shares bounded the efficiency and development of Chinese stock market, the non-tradable shares reform is a significant system formulating the Chinese stock market, which recovers the capital market intrinsic function, as the price discovery function, that constraint the resource allocation function of the listed company. Meanwhile, the reform increases the value of state-owned assets, improves the state-owned assets management system, stable the market, and is benefit for capital market innovation and internationalization. However, non-tradable share cannot get the circulating right after the reforms, which results an amount of non-tradable share flow into the market without control and heavily affect the market stability. To develop the stock market rationally, it takes time to launch the non-tradable shares on the market gradually after the reform. The IPO underpricing level will be decreased step by step rather than achieving to ideal level at one blow. Compared with the abroad research on IPO Underpricing, the research in China is relatively late and immature; especially the research about the Non-tradable shares reform. Despite the reforms keep on improving the IPO underpricing level, Chinese IPO underpricing is still significantly higher than the average world level. In this thesis, we combine the specification and characteristics of Chinese geopolitical environment, and analyze the IPO phenomenon instead of according to the foreign classical theory. In the thesis, we firstly review and conclude the basic situation of China's stock market based on existing research literatures. Then, to pursue the objectives of this study, we examine 377 IPOs over the period January 2001 to December 2011 from Shanghai A-Share market. These IPOs are divided into two parts according to the reform time 2005. For each part of the IPO underpricing issue, both the influence reasons of statistics and regression are analyzed under the SPSS 18.0 platform. The simulation results shown that the IPO underpricing and initial issue prize(PRIZE) is negative related with the company scale(LSIZE), while positive related with the first listed turnover rate(TORNOVER), the first P/E ratio (PE), and the time interval (DAY) before the reform. After the reform, the IPO underpricing issuance and initial issue prize is negative related with lot winning rate (LOT), and positive related with the first listed turnover rate (TORNOVER). Moreover, by separating the samples into different industry groups, factors influenced on underpricing are concluded at different time and industry categories, which explain the high IPOs phenomenon in China.