The differential impact of the bank–firm relationship on IPO underpricing: evidence from China

Xiangchao Hao, Jing Shi and Jian Yang ()

Pacific-Basin Finance Journal, 2014, vol. 30, issue C, 207-232

Abstract: This study investigates the impact of the bank–firm relationship on IPO underpricing in China, an emerging economy with a bank-dominated financial system. Utilizing a hand-collected loan data for 902 Chinese IPO firms from 2004 to 2011, we document that the bank–firm relationship reduces the degree of IPO underpricing. Both the lender's and the borrower's firm characteristics affect the signal quality of the bank–firm relationship, resulting in differential impacts on IPO underpricing. The relationship between firms and banks with high credit quality or the relationship between politically unconnected firms and banks has a more positive impact on mitigating IPO underpricing.

Keywords: The bank–firm relationship; Bank's credit quality; Political connections; Initial public offerings; Commercial banks (search for similar items in EconPapers)
JEL-codes: G14 G15 G21 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:30:y:2014:i:c:p:207-232

DOI: 10.1016/j.pacfin.2014.10.004

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