Abstract: IPO underpricing is one of financial anomalies, and it has always been the concerns of stock market. Especially, there is singularly high IPO underpricing in China stock market. The classic theories in related field consider that IPO underpricing is derived from intentional discount in primary market and emotional premium in secondary market. Although domestic correlated researches indicate that intentional discount in primary market is not existent in Chinese stock market, it cannot be denied that IPO underpricing is assuredly derived from offering price in primary market and exchanging price in secondary market. Based on this thoughtfulness, the article firstly uses stochastic frontier model to analyze offering price and exchanging price of stocks in growth enterprise market in China. The results find that whether offering price or exchanging price has not been underestimated, and, on the contrary, they both have price premium in different degrees. According to the general formula of IPO underpricing, the article discovers that the price premium from offering price can comparatively cause the declining of IPO underpricing, and, on the contrary, the price premium from exchanging price can comparatively cause the increasing of IPO underpricing. In accordance with the above discovery, two-tier stochastic frontier model iscreatively applied to the study of IPO underpricing, and a new IPO underpricing decomposition model is created. In the new model, IPO underpricing is successfully decomposed into discount effect from primary market and premium effect from secondary market. Then, sample data is employed to study IPO underpricing. The results indicate that, relative to discount effect from primary market, the premium effect from secondary market is the major reason of IPO underpricing of sample stocks. The robustness test also proves that, no matter different periods, different industries or different growth firms, premium effect from secondary market is larger than discount effect from primary market. Our sample includes 377 stocks listed on growth enterprise market over the period from October.30, 2009 through March.26, 2015. Except for underwriter's income and financial performance indicators collected from the prospectuses, other data is downloaded from Wind Database. All data is standardized and winsorized in order to control the effect of extreme values. It is the mainly contribution that a new IPO underpricing decomposition model is proposed based on two-tier stochastic frontier model. Therefore, it affords a new idea or paradigm to follow-up study on IPO underpricing.

Key words: IPO underpricing decomposition, two-tiered stochastic frontier model, discount effect, premium effect