Missing the Boat: Regulatory Approval Delay and Investment Project Outcomes

67 Pages Posted: 31 Jul 2020 Last revised: 29 Jun 2022

See all articles by Qiaozhi Ye

Qiaozhi Ye

National University of Singapore

Ronghong Huang

University of Queensland - Business School

Kelvin Jui Keng Tan

University of Queensland - Business School; Financial Research Network (FIRN)

Date Written: June 29, 2022

Abstract

By using unique hand-collected project-level investment data on Chinese private investments in public equity (PIPE) issuances, we show that the length of the regulatory approval process for equity issuance is positively related to the probability of subsequent changes in equity-financed projects and a deterioration in project returns. The effects are more pronounced for firms in a highly competitive industry and with a comparative disadvantage. Furthermore, we show that this relationship is causal by exploiting the exogenous shock to approval delay caused by changes in the Chairman of the China Securities Regulation Commission. In response, equity issuers mitigate the delay impact by temporarily increasing debt financing. Finally, we show that traditional firm-level investment data fail to detect such effects.

Keywords: Corporate Investment, Project Financing, Private Investment in Public Equity, Equity Issuance Regulation, Regulatory Approval Delay, Regulatory Financing Constraints

JEL Classification: G3, G14, G38

Suggested Citation

Ye, Qiaozhi and Huang, Ronghong and Tan, Kelvin Jui Keng, Missing the Boat: Regulatory Approval Delay and Investment Project Outcomes (June 29, 2022). Available at SSRN: https://ssrn.com/abstract=3643380 or http://dx.doi.org/10.2139/ssrn.3643380

Qiaozhi Ye (Contact Author)

National University of Singapore ( email )

1 Business Link
Singapore
Singapore, 117592

Ronghong Huang

University of Queensland - Business School ( email )

Brisbane, Queensland 4072
Australia

Kelvin Jui Keng Tan

University of Queensland - Business School ( email )

Brisbane, Queensland 4072
Australia

Financial Research Network (FIRN) ( email )

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

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