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The Unintended Consequences of Government Regulations in Emerging Financial Markets: Evidence from the Chinese IPO Market

Author

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  • Derrien, François
  • Wu, Xiaohui
  • Zeng, Qi
  • Zhang, Yan

Abstract

This paper explores the impact of regulations imposed by the Chinese government on the development of the Chinese IPO market between 2000 and 2011. Some of these regulations have affected the population of Chinese firms that went public domestically, some firms being excluding from the domestic IPO markets, others being induced to list abroad. We also provide evidence that, because of limits on prices and proceeds, the Chinese IPO market does not attract companies that need cash the most. Some IPO firms that raise large amounts of cash decide to pay large dividends shortly after going public, which investors interpret as evidence that their growth options were overestimated at the time of their IPO.

Suggested Citation

  • Derrien, François & Wu, Xiaohui & Zeng, Qi & Zhang, Yan, 2016. "The Unintended Consequences of Government Regulations in Emerging Financial Markets: Evidence from the Chinese IPO Market," HEC Research Papers Series 1183, HEC Paris, revised 22 Dec 2016.
    • Handle: RePEc:ebg:heccah:1183
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    More about this item

    Keywords

    Regulation; Emerging markets; Initial Public Offerings;
    All these keywords.

    JEL classification:

    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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