The Impact Of Impending Political Promotions On IPO Activity In China

China, as an official standard society, exists all kinds of tangible or intangible political association between government and enterprises. In recent years, increasingly popular with capital market, many local government officials tend to develop local capital market as the important achievement project out of the political career consideration. The audit system,used for the IPO, facilitates government officials get involved in the enterprise issuance.This paper examines the effect of local official promotion on enterprises IPO and its following performance. The selected sample is enterprises listed on main board and small board from June 2006 to June 2015. And the corresponding data of local official promotion is manually selected.The results are as follows:(1) The official promotion promotes the IPO pass rates,especially for the non state-owned enterprises. We find that non-state-owned firms are unconditionally more likely to engage in an IPO in regions with stronger institutions and a mar-oriented economy, as captured by the positive association with Market Development.Introducing the Expected Political Rupture variables, there is little damage to political association imposed by promotion. And the effect on IPO is also weak if the short-term of office, while, it will strengthen if the successor within the region.(2)The short-term and medium-term performance of enterprises listed within the promotion is not as well as those listed beyond the promotion. The performance of state-owned listed enterprises is not influenced by promotion whether the market is marketization or not. While, non state-owned enterprises are negatively influenced by promotion. And the influence gradually fakes in the long term.This paper studies the IPO from the political promotion which can provide a new direction for the subsequent researchers. In addition, by discussing whether the political factor distort the market mechanism and how to distort not only has the theoretical value, but also has more practical significance.