Do political connections matter in accessing capital markets? Evidence from China

Xiaolu Bao, Sofia Johan and Kenji Kutsuna

Emerging Markets Review, 2016, vol. 29, issue C, 24-41

Abstract: We analyze the influence of political connections on firms' access to capital and the ensuing effect on the cost of raising capital. Using a dataset of 413 IPOs from 2009 to 2012, we exploit a research setting where government is still highly involved with the process. We find that firms rely on political connections to reduce IPO rejection risk as a firm's political connections are positively associated with the propensity of obtaining approval for an IPO. We further find that political connections are negatively associated with the cost of IPO and connected firms appear to perform better subsequent to their IPOs.

Keywords: IPO; Political connection; Start-ups; China; Emerging markets (search for similar items in EconPapers)
JEL-codes: G32 G38 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (30)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:29:y:2016:i:c:p:24-41

DOI: 10.1016/j.ememar.2016.08.009

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