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Political connections and the process of going public: evidence from China

  • Francis , Bill B

    (Lally School of Management and Technology)

  • Hasan, Iftekhar

    ()

    (Lally School of Management, Rensselaer Polytechnic Institute and Bank of Finland)

  • Sun, Xian

    (Office of the Comptroller of the Currency, US Department of the Treasury)

We examine how political connections impact the process of going public. Specifically, we test how political connections impact the pricing of newly offered shares, the magnitude of underpricing, and the fixed cost of going public. Based on experiences of the new public firms in the Chinese security markets and using multiple measures of political connections, we find robust evidence that issuing firms with political connections reap significant preferential benefits from going public. To be specific, we find that firms – irrespective of ownership arrangements – with greater political connections have higher offering prices, less underpricing, and lower fixed costs during the going-public process.

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File URL: http://www.suomenpankki.fi/en/julkaisut/tutkimukset/keskustelualoitteet/Documents/0907netti.pdf
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Paper provided by Bank of Finland in its series Research Discussion Papers with number 7/2009.

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Length: 49 pages
Date of creation: 03 Feb 2009
Date of revision:
Handle: RePEc:hhs:bofrdp:2009_007
Contact details of provider: Postal: Bank of Finland, P.O. Box 160, FI-00101 Helsinki, Finland
Web page: http://www.suomenpankki.fi/en/

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