Abstract: Regulatory inquiry letters serve as an essential tool for exchanges to regulate the quality of information disclosure by companies under the registration-based IPO system. This paper employs a LDA topic model to quantify the extent of “irrelevant responses” in IPO regulatory inquiries and explores their impact on IPO pricing efficiency. The findings are as follows: First, the more severe the phenomenon of “irrelevant responses” in regulatory inquiry letters, the lower the IPO pricing efficiency. Second, “irrelevant responses” reduce pricing efficiency by influencing the pricing behavior of institutional investors in the primary market and investors in the secondary market. Third, the effect of “irrelevant responses” on pricing efficiency is moderated by the underwriter’s reputation and the development of factor markets. Fourth, the intensification of the “irrelevant responses” phenomenon leads to the expansion of information asymmetry and an increase in investors’ speculative transactions. Concurrently, companies with severe “irrelevant responses” issues exhibit significantly higher probabilities of financial restatements and elevated operational risks post-IPO, while demonstrating reduced R&D intensity. This paper, from the perspective of the quality of responses to regulatory inquiries, demonstrates that “irrelevant responses” during the IPO stage carry valuable market information. This finding offers a theoretical foundation for optimizing the inquiry supervision framework employed by exchanges under the registration-based IPO system.

Key words: IPO regulatory inquiries, IPO underpricing, irrelevant responses, LDA topic model