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Political economy of IPO underpricing: the evidence from China

Author

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  • Jian Chen
  • Roger Strange

Abstract

This paper looks at the IPO underpricing puzzle in a political economy perspective, as previous theories have considered only the ‘market economy factor’ in IPO underpricing, and failed to incorporate the ‘political economy factor’ in determining IPO underpricing. This is particularly relevant to emerging markets such as China, where the IPO is not only a process of raising fresh capital, but also one of privatisation. By examining the Chinese case with the political economy perspective, we find that the IPO underpricing is negatively related to the proportion of the shares held by various government organisations. We also offer explanations using an angle of political economy.

Suggested Citation

  • Jian Chen & Roger Strange, 2012. "Political economy of IPO underpricing: the evidence from China," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 10(2), pages 111-129, January.
    • Handle: RePEc:taf:jocebs:v:10:y:2012:i:2:p:111-129
    DOI: 10.1080/14765284.2012.673778
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    References listed on IDEAS

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    1. International Finance Corporation & OECD, 2009. "Practical Guide to Corporate Governance," World Bank Publications - Reports 28085, The World Bank Group.
    2. Barry Naughton, 2007. "The Chinese Economy: Transitions and Growth," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262640643, December.
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    Cited by:

    1. Qile Tan & William Dimovski & Victor Fang, 2015. "The Underpricing of Infrastructure IPOs: Evidence from China," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 18(04), pages 1-31, December.
    2. Azevedo, Alcino & Guney, Yilmaz & Leng, Jingsi, 2018. "Initial public offerings in China: Underpricing, statistics and developing literature," Research in International Business and Finance, Elsevier, vol. 46(C), pages 387-398.

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