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The IPO of Industrial and Commercial Bank of China and the 'Chinese Model' of privatizing large financial institutions

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  • Franklin Allen
  • Jun 'QJ' Qian
  • Susan Chenyu Shan
  • Mengxin Zhao

Abstract

We examine the privatization process of the Industrial and Commercial Bank of China (ICBC), the largest bank in the world by market capitalization, and its dual initial public offerings (IPOs) in the Hong Kong and Shanghai Stock exchanges in 2006. The Chinese government retains majority equity ownership of ICBC while foreign institutional investors hold minority equity stakes. Other large financial institutions went through the same reform process and have similar, post-IPO ownership structures. The largest Chinese banks, as a group, outperformed their counterparts from other emerging and developed markets before and during the 2007-2009 financial crisis. We argue that the 'Chinese model' of privatizing and managing large financial institutions can be advantageously used in other countries.

Suggested Citation

  • Franklin Allen & Jun 'QJ' Qian & Susan Chenyu Shan & Mengxin Zhao, 2014. "The IPO of Industrial and Commercial Bank of China and the 'Chinese Model' of privatizing large financial institutions," The European Journal of Finance, Taylor & Francis Journals, vol. 20(7-9), pages 599-624, September.
    • Handle: RePEc:taf:eurjfi:v:20:y:2014:i:7-9:p:599-624
    DOI: 10.1080/1351847X.2012.671780
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    Citations

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    Cited by:

    1. Allen, Franklin & Zhang, Chenying & Qian, Jun & Zhao, Mengxin, 2011. "China's Financial System: Opportunities and Challenges," Working Papers 11-54, University of Pennsylvania, Wharton School, Weiss Center.
    2. Liu, Jianan & Stambaugh, Robert F. & Yuan, Yu, 2019. "Size and value in China," Journal of Financial Economics, Elsevier, vol. 134(1), pages 48-69.
    3. Ming-Chung Chang & Chiang-Ping Chen & Chien-Cheng Lin & Yu-Ming Xu, 2022. "The Overall and Disaggregate China’s Bank Efficiency from Sustainable Business Perspectives," Sustainability, MDPI, vol. 14(7), pages 1-16, April.
    4. Wu, Fei, 2019. "Sectoral contributions to systemic risk in the Chinese stock market," Finance Research Letters, Elsevier, vol. 31(C).
    5. Liangliang He & Lei Chen & Frank Hong Liu, 2017. "Banking reforms, performance and risk in China," Applied Economics, Taylor & Francis Journals, vol. 49(40), pages 3995-4012, August.
    6. Gu, Xian & Hasan, Iftekhar & Zhu, Yun, 2019. "Political influence and financial flexibility: Evidence from China," Journal of Banking & Finance, Elsevier, vol. 99(C), pages 142-156.
    7. Han, Xing & Li, Kai & Li, Youwei, 2020. "Investor overconfidence and the security market line: New evidence from China," Journal of Economic Dynamics and Control, Elsevier, vol. 117(C).

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