Regional IPO Waves In China:Official Achievement VS IPO Performance

The china’s listed companies of the capital market have experienced a sharp expansion which in part due to the regional IPO waves. Especially since2005, the number of listed company has been regarded as achievement project by many local governments. Then, in addition to the regional endowment factors such as economic development、industry characters and so on, what’s the relationship between local political resources and IPO waves? And what’s the IPO performance behind official achievement? It is the problem that this article mainly focuses on.China is a society with "official rank standard", political resources are not only direct for example the entrepreneurs themselves have political connections but also can be indirect and hidden. It has great significance to study the hidden political connections in deeply. Therefore, the paper construct political power index (PPI) to measure the local political resources, and take China listed companies as sample. With the data from2006to jun,2012, the article investigates the influence of the political resources to the IPO approval. Then this paper investigates if these companies have bad performance after IPO. At last, the article further studies whether the regional IPO waves have a good effect on the official achievement and promotion.The article finds out the following conclusions. The research shows that local political resources have a significant and positive effect on the IPO approval, this also means that some enterprises which don’t have qualifications for public can make performance package, take advantage of hidden political connections to go public successfully. But these companies will have an underperformance after six months, it indicates that official achievement enhances whereas IPO performance declines. Meanwhile the article distinguishes between SOEs and non-SOEs and finds that the effect of PPI to non-SOEs is more significant, and the non-SOEs will do even more badly. In the end, this research proves that IPO waves are helpful to the official achievement and promotion.The main significance and innovation lie in the following two aspects. Firstly, we construct Political Power Index (PPI) by collecting the officials’information manually. This is very different from many researchers who measure political connections based on the entrepreneurs’political backgrounds, and lifts from the level of human relationship to the level of region, from the direct political connection to indirect political connection. Secondly, previous studies focus more on the macro economic development such as GDP growth to measure the official performance, but this paper studies the political promotion from the viewpoint of IPO waves which can provide a new direction for the subsequent academic research about the relationship between economic growth and official promotion.