Does aggressiveness help? Evidence from IPO corruption and pricing in China

Yong Huang, Chao Yan and Kam C. Chan

Journal of Corporate Finance, 2021, vol. 67, issue C

Abstract: Using a unique database of Chinese firms bribing initial public offering (IPO) regulators, we examine the impact of bribing on IPO pricing. Our findings suggest that bribing firms are younger, smaller, more volatile in their operating activities, and more generous in compensating underwriters and management. Most important, bribing firms price their IPO shares more aggressively than non-bribing firms and exhibit a higher price-to-earnings ratio, lower first-day return, and poorer post-IPO stock performance. Additional analyses suggest that both bribing and non-bribing firms exhibit negative announcement returns after the arrest of corrupt officials. However, the effect is stronger for bribing firms. Overall, bribing firms are systematically more aggressive than their non-bribing counterparts. They concede less to IPO investors and reward underwriters and management for helping them access the capital market.

Keywords: IPO underpricing; Corporate corruption; Pricing aggressiveness (search for similar items in EconPapers)
JEL-codes: D73 G18 G32 P34 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:67:y:2021:i:c:s0929119921000225

DOI: 10.1016/j.jcorpfin.2021.101901

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