The Unintended Consequences of Government Regulations in Emerging Financial Markets: Evidence from the Chinese IPO Market

45 Pages Posted: 14 Dec 2016 Last revised: 22 Dec 2016

See all articles by François Derrien

François Derrien

HEC Paris - Finance Department

Xiaohui Wu

Xiamen University

Qi Zeng

University of Melbourne - Department of Finance; Financial Research Network (FIRN)

Yan Zhang

Xiamen University

Date Written: December 13, 2016

Abstract

This paper explores the impact of regulations imposed by the Chinese government on the development of the Chinese IPO market between 2000 and 2011. Some of these regulations have affected the population of Chinese firms that went public domestically, some firms being excluding from the domestic IPO markets, others being induced to list abroad. We also provide evidence that, because of limits on prices and proceeds, the Chinese IPO market does not attract companies that need cash the most. Some IPO firms that raise large amounts of cash decide to pay large dividends shortly after going public, which investors interpret as evidence that their growth options were overestimated at the time of their IPO.

Keywords: Regulation, Emerging markets, Initial Public Offerings

JEL Classification: G28, G30, G38

Suggested Citation

Derrien, François and Wu, Xiaohui and Zeng, Qi and Zhang, Yan, The Unintended Consequences of Government Regulations in Emerging Financial Markets: Evidence from the Chinese IPO Market (December 13, 2016). HEC Paris Research Paper No. FIN-2016-1183. Available at SSRN: https://ssrn.com/abstract=2885023 or http://dx.doi.org/10.2139/ssrn.2885023

François Derrien

HEC Paris - Finance Department ( email )

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
France
33 1 39 67 72 98 (Phone)

HOME PAGE: http://www.hec.fr/derrien

Xiaohui Wu

Xiamen University ( email )

Xiamen, Fujian 361005
China

Qi Zeng (Contact Author)

University of Melbourne - Department of Finance ( email )

Faculty of Economics and Commerce
Parkville, Victoria 3010 3010
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Yan Zhang

Xiamen University ( email )

Xiamen, Fujian 361005
China

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