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Political connections and the long-term stock performance of Chinese IPOs

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  • Liu, Jianlei
  • Uchida, Konari
  • Gao, Ruidong

Abstract

We analyse the long-term stock performance of Chinese initial public offerings (IPOs) between the years of 2000 and 2007. The results reveal that firms with political connections experience better long-term stock performance. Our results suggest that the abolition of the Issuance Quota System and Channel Restriction System has a negative influence on the long-term performance of IPOs. This evidence is consistent with the view that local government officials are likely to select politically connected companies to go public.

Suggested Citation

  • Liu, Jianlei & Uchida, Konari & Gao, Ruidong, 2012. "Political connections and the long-term stock performance of Chinese IPOs," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 22(4), pages 814-833.
    • Handle: RePEc:eee:intfin:v:22:y:2012:i:4:p:814-833
    DOI: 10.1016/j.intfin.2012.05.005
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    More about this item

    Keywords

    Initial public offerings; Long-term underperformance; Political connections; Regulations; China;
    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
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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