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Provincial economic performance and underpricing of IPOs: Evidence from political interventions in China

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  • Liu, Jianlei
  • Uchida, Konari
  • Li, Yuan

Abstract

We examine the underpricing of 2,131 Chinese initial public offerings (IPOs) between 2005 and 2017. The results indicate that state-owned enterprises (SOEs) controlled by the local government (local SOEs) offer significantly higher underpricing when they go public than SOEs controlled by the central government and non-SOEs do. This phenomenon is evident for local SOEs from less developed provinces, after controlling for the direct effect of regional economic performance. These results suggest local government officials underprice initial public offerings to make regional companies successfully go public to promote the regional economy.

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  • Liu, Jianlei & Uchida, Konari & Li, Yuan, 2020. "Provincial economic performance and underpricing of IPOs: Evidence from political interventions in China," Economic Modelling, Elsevier, vol. 86(C), pages 274-285.
    • Handle: RePEc:eee:ecmode:v:86:y:2020:i:c:p:274-285
    DOI: 10.1016/j.econmod.2019.09.055
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    More about this item

    Keywords

    Chinese IPOs; Underpricing; Provincial economic performance; State-owned enterprises; Local government officials;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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