Financial Institutions’ Political Connections And The IPO Opportunities

After the 2008 global financial crisis, the A-share market has emerged as the largest IPO market in the world which is supportedby the reform of the IPO system. However, the reform also breedsthe problem of "relationship".Issuers try to establish an "inexplicable" relationship with issuance examination committee by hiring financial institutions. Can such a relationship determine the capital market resources configuration? That is, is there a correlation between the political contacts of financial institutions and the probability of issuers to be verified and qualified?However, research on this topic has just begun in China.This paper uses the sample of companies that proposed issue of A-sharebetween 2004 and 2012 on the Shanghai and Shenzhen stock exchanges and data of information disclosed by IPO prospectus of those companies or by Wind. We constructed corresponding indicator variables and empirically studied whetherpoliticalties of financial institutions would affect the probability of issuers to be verified and qualified. Based on results, finally we established a discriminant.The empirical results show that financial institutions, particularly the political connections of accounting firms can significantly increase the probability of issuers to be listed. The stability testing with threshold of 0.85 can accurately determine whether issuers can pass the verification.This paperembodies innovation in the following aspects:First of all, the research perspective, whether the issuerget through the issuance examination committeesuccessfully has a very important strategic significance of the company’s developmenton the micro level, on the macro level it is the result of the national’s allocation of resources.This paper focuses on the impact offinancial institutions’ political connectionson the issuers probability of being listed, and builds the discriminant. Using the financial institutions’political connections and issuers’ passing issuance examination committee has certain innovation. Secondly, as the research methods, this paper chooses the Logistic regression model and constantly optimize the choice of parameters to build the discriminant has certain innovative.