Political connection of financial intermediaries: Evidence from China's IPO market

Donghua Chen, Yuyan Guan, Tianyu Zhang and Gang Zhao

Journal of Banking & Finance, 2017, vol. 76, issue C, 15-31

Abstract: Using a sample of Chinese Initial Public Offerings (IPOs) from 2006 to 2011, we document that politically connected (PC) underwriters increase the likelihood of clients’ IPO applications being approved by the Chinese Securities Regulatory Commission (CSRC). We further show that PC underwriters charge premium underwriting fees. Consistent with the rent-seeking argument, we find that minority shareholders’ interests may be impaired as indicated by post-IPO underperformance. We do not detect significant differences in the underpricing of IPO deals underwritten by PC versus non-PC investment banks.

Keywords: Political connection; Underwriters; IPO; Post-IPO underperformance; Underpricing (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (48)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:76:y:2017:i:c:p:15-31

DOI: 10.1016/j.jbankfin.2016.11.023

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