The Impact Of Political Connections On The Market Timing Of Private Listed Companies' Seos Under Regulation And Social Wealth Effect

In transition economics stage, government especially local governments often have strongly motivation to impact on the resource allocation for short of marketable institutions in the nations or regions of less enough products and credit market. Firms, especially private firms have to lseek subsititute mechanism to overcome them. Building political connections is one of the ways.Seasoned equity offerings (SEOs) are the most important means of Chinese listed companies in China. Empirical investigation results show that the market timing of SEOs is one of the most important factors for decision making. But the capital market of China has a most uncommonly features which the market is regulated under government.In this dissertation, I research the SEOs behaviors of private listed firms with political connections under regulation enviornment. I test whether there exists market timing effect, and whether the SEOs scales and pricing impact by the market timing. The main contents compose of three parts.In the first part, I use the dual listed sample between 1998 and 2008 to focus on the behavior of market timing when H shares'return domestic market under the long-term regulation environment. We find regulation environment and market condition are two important and significant factors which influent the timing motivation. We further find that the exchange rate of HKD/CNY is one of key factors motivating H shares'return. And we further find that all the dual listed companies are state owned business, the top managements often have important political connetions.In the second part, there are 268 samples of private firms'seasoned equity offerings (SEOs). I use two methods to empirical investigate the impact of political connections on the private firms'SEOs under financing regulation. One method is that the poltical connetions are donoted by the dummy variable. The variable is 0 or 1 to for the firms without political connection and with political connections respectively. Empirical results show that the firms with political connections could easier timing their SEOs significantly than non-political, I further find that firms with political connections should issue much more and have a higher price on their issuance significantly under regulation than firms without political connections. Another method is that the political connections are denoted by the influence, and we build the political connections influence index to investigate the impact of political connections to the private firms'SEOs. Empirical results show that firms with higher political connections could timing their SEOs signicanlty than lower political connetions which prove the market timing effect on private firms'SEOs under regulation.In the third part, I use the dynamic game theory to investigate the social wealth effect of political connections under different regulation environments. There are two issuance systems in the world capital market which are merit-based approval system and registration system. Both of them have their own advantages and disadvantages. And the current system is still a merit-based approval system with considerable administrative influence during the process. So I investigate the polical connections effect on the different issuance systems. Results show that the registration should be the better system for the political cost. And the law perfect, the information cost and the investor'loss coefficient are the factors which impact the issuance system choice.