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Political connections and access to IPO markets in China

Listed author(s):
  • Li, Guoping
  • Zhou, Hong

Using hand-collected data on IPOs by private-owned enterprises, this article examines the regulatory benefits of political connections in China's state-controlled going public process, a subject that has rarely been investigated in existing literature. This article makes the following findings: first, political connections have significant positive impact on enterprises' chances of being approved for IPOs; second, enterprises with political connections are significantly more likely to receive preferential treatments (e.g., higher offering price-to-earning ratio) from regulatory authorities; third, enterprises with political connections are significantly less likely to be selected for pre-IPO on-site auditing by regulatory authorities. The findings of this article may provide answer to the question why China has been so reluctant to adopt disclosure-based regulatory regime as well as insights into the puzzle of the consistent poor performance of China's stock markets.

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File URL: http://www.sciencedirect.com/science/article/pii/S1043951X15000206
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Article provided by Elsevier in its journal China Economic Review.

Volume (Year): 33 (2015)
Issue (Month): C ()
Pages: 76-93

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Handle: RePEc:eee:chieco:v:33:y:2015:i:c:p:76-93
DOI: 10.1016/j.chieco.2015.01.009
Contact details of provider: Web page: http://www.elsevier.com/locate/chieco

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