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Partial private sector oversight in China's A-share IPO market: An empirical study of the sponsorship system

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  • Hoque, Hafiz
  • Mu, Shaolong

Abstract

The Chinese IPO market has introduced the private oversight of sponsors under tight government control. We examine the performance of IPOs that are managed under private sector oversight, known as the sponsorship system. Using buy-and-hold returns, operating performance measures, Fama-French five factor models, propensity score matching, and triple DiD (DDD), we find that long-term performance is better under the sponsorship system. Additionally, we find that IPOs with reputable sponsor institutions and reputable sponsor representatives perform better. Relatedly, the CSRC takes less time to review the admission documents prepared by reputable-sponsor institutions. Regulatory action taken by the CSRC is shown to be effective, as the number of IPO businesses declines for sanctioned sponsor institutions, and the IPOs managed by them perform better once they have received a penalty.

Suggested Citation

  • Hoque, Hafiz & Mu, Shaolong, 2019. "Partial private sector oversight in China's A-share IPO market: An empirical study of the sponsorship system," Journal of Corporate Finance, Elsevier, vol. 56(C), pages 15-37.
    • Handle: RePEc:eee:corfin:v:56:y:2019:i:c:p:15-37
    DOI: 10.1016/j.jcorpfin.2019.01.002
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    Cited by:

    1. Wilson H. S. Tong & Michael B. T. Wong, 2020. "Does reputation of sponsors matter in IPO? Evidence from Hong Kong," Frontiers of Business Research in China, Springer, vol. 14(1), pages 1-24, December.
    2. Chan, Kam C. & Li, Guangzi, 2022. "Prior banking relationships and long-term IPO performance," International Review of Economics & Finance, Elsevier, vol. 77(C), pages 123-134.
    3. Mingsheng Li & Desheng Liu & Jing Zhang & Luxiu Zhang, 2021. "Volatile market condition, institutional constraints, and IPO anomaly: evidence from the Chinese market," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(1), pages 1239-1275, March.
    4. Di Zhou & Xiaoyu Liang & Ye Zhou & Kai Tang, 2020. "Does Emission Trading Boost Carbon Productivity? Evidence from China’s Pilot Emission Trading Scheme," IJERPH, MDPI, vol. 17(15), pages 1-16, July.
    5. Tao Huang & Xueyong Zhang, 2022. "Media coverage of industry and the cross‐section of stock returns," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(S1), pages 1107-1141, April.
    6. Li, Yi & Zhang, Wei, 2021. "Another game in town: Spillover effects of IPOs in China," Journal of Corporate Finance, Elsevier, vol. 67(C).
    7. Miray Çelik & Volkan Öngel, 2019. "The Effect of Sponsorship Activities and Consumer-Oriented Activities on Growth Performance," American Journal of Economics and Business Administration, Science Publications, vol. 11(1), pages 47-60, October.

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    More about this item

    Keywords

    Private sector oversight; Sponsorship system; IPOs; Buy-and-hold return; Fama-French five factor model; CSRC;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

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