Download this Paper Open PDF in Browser

The Differential Impact of the Bank-Firm Relationship on IPO Underpricing: Evidence from China

55 Pages Posted: 26 Jan 2013 Last revised: 27 Sep 2014

Xiangchao Hao

Institute of Finance, School of Economics, Nankai University

Jing Shi

RMIT University - School of Economics, Finance and Marketing

Jian Yang

University of Colorado at Denver - Business School

Date Written: January 25, 2013

Abstract

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.

Keywords: bank-firm relationship, bank’s credit quality, political connections, initial public offerings, commercial banks

JEL Classification: G12, G21

Suggested Citation

Hao, Xiangchao and Shi, Jing and Yang, Jian, The Differential Impact of the Bank-Firm Relationship on IPO Underpricing: Evidence from China (January 25, 2013). Asian Finance Association (AsFA) 2013 Conference . Available at SSRN: https://ssrn.com/abstract=2206871 or http://dx.doi.org/10.2139/ssrn.2206871

Xiangchao Hao

Institute of Finance, School of Economics, Nankai University ( email )

No. 94, Wenjin Road
Tianjin, TianJin 300071
China

Jing Shi

RMIT University - School of Economics, Finance and Marketing ( email )

Building 80
445 Swanston Street
Melbourne VIC, Melbourne 3000
Australia

Jian Yang (Contact Author)

University of Colorado at Denver - Business School ( email )

1250 14th St.
Denver, CO 80204
United States

Paper statistics

Downloads
191
Rank
132,907
Abstract Views
874