TY - JOUR
T1 - Political connection of financial intermediaries
T2 - Evidence from China's IPO market
AU - Chen, Donghua
AU - Guan, Yuyan
AU - Zhang, Tianyu
AU - Zhao, Gang
PY - 2017/3/1
Y1 - 2017/3/1
N2 - 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.
AB - 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.
KW - IPO
KW - Political connection
KW - Post-IPO underperformance
KW - Underpricing
KW - Underwriters
UR - http://www.scopus.com/inward/record.url?scp=85001930610&partnerID=8YFLogxK
UR - https://www.scopus.com/record/pubmetrics.uri?eid=2-s2.0-85001930610&origin=recordpage
U2 - 10.1016/j.jbankfin.2016.11.023
DO - 10.1016/j.jbankfin.2016.11.023
M3 - RGC 21 - Publication in refereed journal
SN - 0378-4266
VL - 76
SP - 15
EP - 31
JO - Journal of Banking and Finance
JF - Journal of Banking and Finance
ER -
