Do Political Connections Help Firms’ Accessing the IPO Market?

43 Pages Posted: 23 Aug 2012

See all articles by Qigui Liu

Qigui Liu

Department of Finance and Accounting, School of Management, Zhejiang University

Gary Gang Tian

Macquarie University - Department of Applied Finance and Actuarial Studies; Macquarie University, Macquarie Business School

Jinghua Tang

University of Wollongong

Date Written: August 20, 2012

Abstract

This paper examines the effect of political connections on firms’ access to Chinese IPO market. We find a positive relationship between CEO/chairman’s political connections and the probability of IPO approval of entrepreneurial firms. We provide evidence that connected independent directors and PE/VC investors bring important networks which facilitate firms’ access to the IPO market, albeit the former complements and the latter substitutes the CEO/chairman’s connections. We argue that in emerging markets where government intervention is still prevalent, entrepreneurial firms usually build political connections in order to facilitate their access to both the private financing market and the public equity market.

Keywords: political connections, IPO approval, independent director, PE/VC

JEL Classification: G30, G38

Suggested Citation

Liu, Qigui and Tian, Gary Gang and Tang, Jinghua, Do Political Connections Help Firms’ Accessing the IPO Market? (August 20, 2012). 25th Australasian Finance and Banking Conference 2012. Available at SSRN: https://ssrn.com/abstract=2134766 or http://dx.doi.org/10.2139/ssrn.2134766

Qigui Liu (Contact Author)

Department of Finance and Accounting, School of Management, Zhejiang University ( email )

Hangzhou, Zhejiang Province 310058
China

Gary Gang Tian

Macquarie University - Department of Applied Finance and Actuarial Studies ( email )

Room 513, Building E4A
North Ryde, NSW, 2109
Australia

Macquarie University, Macquarie Business School ( email )

New South Wales 2109
Australia

Jinghua Tang

University of Wollongong ( email )

Northfields Avenue
Wollongong, New South Wales 2522
Australia

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