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

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

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Original languageEnglish
Pages (from-to)15-31
Journal / PublicationJournal of Banking and Finance
Publication statusPublished - 1 Mar 2017


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.

Research Area(s)

  • IPO, Political connection, Post-IPO underperformance, Underpricing, Underwriters