The Differential Impact of the Bank-Firm Relationship on IPO Underpricing: Evidence from China
Nankai University - School of Economics
RMIT University - School of Economics, Finance and Marketing; Financial Research Network (FIRN)
University of Colorado at Denver - Business School
January 25, 2013
Asian Finance Association (AsFA) 2013 Conference
This study investigates the impact of the bank-firm relationship on IPO underpricing in China, an emerging economy with a bank-dominated financial system. With loan data from 902 IPO firms from 2004 to 2011, we document that the bank-firm relationship reduces the degree of IPO underpricing. Both the lender’s and the borrower’s firm characteristics affect the signal quality of the bank-firm relationship, resulting in differential impacts on IPO underpricing. The relationship between firms and banks with high credit quality or the relationship between firms without political connections and banks has a more positive impact on IPO underpricing.
Number of Pages in PDF File: 55
Keywords: bank-firm relationship, bank’s credit quality, political connections, initial public offerings, commercial banks
JEL Classification: G12, G21
Date posted: January 26, 2013 ; Last revised: September 27, 2014
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