Abstract:Based on the dataset of the IPO companies listed in Shenzhen and Shanghai of China from 2009 to 2014, this article expands investor sentiment to two dimensions, which are institutional investors rational sentiment and individual investors irrational sentiment, and researches the relationship of investors sentiment on IPO pricing, managers over-optimism and corporate performance.The empirical results show that:Institutional investors rational sentiment has a significantly negative correlation with the over-funding of IPO companies, individual investors irrational sentiment has a significantly negative correlation with the first-day premium of IPO companies; Institutional investors rational sentiment and individual investors irrational sentiment both can shape the over-optimism of the IPO company managers, institutional investors has a significantly negative correlation with the over-optimism of the IPO company managers, individual investors irrational sentiment has a significantly negative correlation with the over-optimism of the IPO company managers;When the IPO companies have a high over-funding and have abundant cash flow, the over-optimism of the IPO company managers can aggravate over-investment behavior of the company and damage the company's overall performance level;When the IPO companies have a low over-funding and lack of cash flow, the over-optimism of the IPO company managers can alleviate the underinvestment caused by lack of funds and will help improve the company's performance. At the same time, individual investors irrational sentiment will affect the performance of IPO companies by the "intermediate channel of managerial over-optimism".The results have a certain explanation about the phenomenon of "IPO discount puzzle" in China, and also contribute to manager of IPO company to identify the information value in stock market and take appropriate financing stratrgy.