The consequences of shifting the IPO offer pricing power from securities regulators to market participants in weak institutional environments : Evidence from China

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

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Detail(s)

Original languageEnglish
Pages (from-to)349-370
Journal / PublicationJournal of Corporate Finance
Volume50
Online published11 Oct 2016
Publication statusPublished - Jun 2018

Abstract

We examine the consequences of shifting the IPO offer pricing power from securities regulators to market participants in a representative weak investor protection country, China. We show IPO offer prices relative to reported earnings are less depressed when determined by market participants than by securities regulators. IPO firms are also less likely to select a low quality auditor or inflate the pre-IPO earnings when IPO offer prices are determined by market participants. However, we find no evidence that IPO offerings are more likely to be overpriced when offer prices are determined by market participants. Furthermore, IPO firms' financial reporting choices made at the time of the IPO have a long lasting impact on the firms' subsequent financial reporting quality. Overall, our results contribute to the ongoing debate on the appropriate roles of securities regulators versus market forces in protecting public investors in markets with weak institutional environments.

Research Area(s)

  • IPO regulation, Financial reporting quality, Auditor choice, IPO offer pricing, INITIAL PUBLIC OFFERINGS, EARNINGS MANAGEMENT, CORPORATE GOVERNANCE, EQUITY OFFERINGS, AUDITOR CHOICE, ADD VALUE, FIRMS, PERFORMANCE, OWNERSHIP, ACCRUALS

Citation Format(s)

The consequences of shifting the IPO offer pricing power from securities regulators to market participants in weak institutional environments : Evidence from China. / Chen, Jun; Ke, Bin; Wu, Donghui; Yang, Zhifeng.

In: Journal of Corporate Finance, Vol. 50, 06.2018, p. 349-370.

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