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Does political capital create value in the IPO market? Evidence from China

Liu, Qigui, Tang, Jinghua and Tian, Gary Gang 2013, Does political capital create value in the IPO market? Evidence from China, Journal of corporate finance, vol. 23, pp. 395-413.

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Title Does political capital create value in the IPO market? Evidence from China
Author(s) Liu, Qigui
Tang, Jinghua
Tian, Gary Gang
Journal name Journal of corporate finance
Volume number 23
Start page 395
End page 413
Total pages 19
Publisher Elsevier
Place of publication Amsterdam, The Netherlands
Publication date 2013
ISSN 0929-1199
Keyword(s) Political capital
IPO approval
Post-IPO performance
Emerging market
Summary This study examines the value of political capital in the Chinese IPO market. We find a positive relationship between a politically connected executive and the probability of IPO approval of entrepreneurial firms. We further identify that shareholders value those connections and give a market premium to connected firms after the firms go public. We provide evidence that other types of political capital gained through external sources, such as politically connected sponsors and PE investors, also bring benefits to the firms in their IPO approval, and these connections substitute for the effect of the executive's political connections on IPO approval. We argue that in emerging markets where government intervention is still prevalent, political capital does create value and entrepreneurial firms usually build political capital to facilitate their access to the IPO market, although other types of political capital do not bring further benefits into the post-IPO market.
Language eng
Field of Research 150201 Finance
Socio Economic Objective 900101 Finance Services
HERDC Research category C1.1 Refereed article in a scholarly journal
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Document type: Journal Article
Collection: Department of Finance
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