Financial intermediations, underwriter reputation and underwriting risks in China's stock market

Insider control and administrative interruptions are the two main factors of corporate governance under the absence of well-organized complete legal systems and regulation constrains mechanism in China. Under the background described above, there are great underwriting risks in underwriting business and it does damage to the healthy development of financial. intermediations and the whole financial market further. According to these situations, this article examines underwriting risks, and put forward our hypotheses building from underwriter reputation theories and insider controlling theories, and last does empirical study on them. The results tell us that the insider control, dual-shareholder structures and administrative interruptions are the main source of the underwriting risks; however-the compensation mechanism of underwriting risks is inefficient. Although reputation play a very important role in underwriters' decisions and control underwriting risks, high reputation underwriters' decisions are interrupted frequently.