The contingent value of CEO political connections: A study on IPO performance in China

Wu, Jianfeng; Li, Sali; Li, Zijie

doi:10.1007/s10490-012-9300-1

Cited by 80 publications

(55 citation statements)

References 85 publications

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“…Lastly, prior studies show that political capital (measured by politically connected executives) destroys value in state-controlled firms by decreasing post-IPO performance or creates value in a pooled sample of all listed firms without distinguishing between state-controlled and entrepreneurial firms (Liu et al, 2012;Wu et al, 2012). Our study extends this literature by confirming the value-creating effect of executives' political connections in a sample of entrepreneurial firms.…”

supporting

confidence: 77%

“…5 For example, examine the effect of political connections on the post-IPO performance of Chinese state-controlled firms; their study ignores the effect of political connections on firms' accessing the IPO market and focuses mainly on political connections in state-controlled firms, within which the effect of political connections can be diluted by state ownership. Liu et al (2012) and Wu et al (2012) find that politically connected IPOs outperform non-connected IPOs in the long term, using a pooled sample of Chinese firms that includes both state-controlled and non-state-controlled firms. 6 A sponsor, taking responsibility for his endorsement of an IPO by improving the quality of listed companies' prospectus disclosures, is also a primary underwriter in the Chinese IPO market.…”

Section: Introductionmentioning

confidence: 99%

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Does Political Capital Create Value in the IPO Market? Evidence from China

2014

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This study examines the value of political capital in the Chinese IPO market. We find a positive relationship between a politically connected executive and the probability of IPO approval of entrepreneurial firms. We further identify that shareholders value those connections and give a market premium to connected firms after the firms go public. We provide evidence that other types of political capital gained through external sources, such as politically connected sponsors and PE investors, also bring benefits to the firms in their IPO approval, and these connections substitute for the effect of the executive's political connections on IPO approval. We argue that in emerging markets where government intervention is still prevalent, political capital does create value and entrepreneurial firms usually build political capital to facilitate their access to the IPO market, although other types of political capital do not bring further benefits into the post-IPO market. ABSTRACTThis study examines the value of political capital in the Chinese IPO market. We find a positive relationship between a politically connected executive and the probability of IPO approval of entrepreneurial firms. We further identify that shareholders value those connections and give a market premium to connected firms after the firms go public. We provide evidence that other types of political capital gained through external sources, such as politically connected sponsors and PE investors, also bring benefits to the firms in their IPO approval, and these connections substitute for the effect of the executive's political connections on IPO approval. We argue that in emerging markets where government intervention is still prevalent, political capital does create value and entrepreneurial firms usually build political capital to facilitate their access to the IPO market, although other types of political capital do not bring further benefits into the post-IPO market.

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confidence: 77%

Section: Introductionmentioning

confidence: 99%

Does Political Capital Create Value in the IPO Market? Evidence from China

2014

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“…Thus signaling theory is particularly relevant for examining film performance. However, despite the fact that the theory has been applied in a wide array of research contexts (e.g., Connelly et al, 2011;Hou, Liu, Fan, & Wei, 2016;Wu, Li, & Li, 2013) and various signal variables have been examined in film industry research, its explicit application to the film industry literature remains limited, exceptions including Akdeniz and Talay (2013), Basuroy, Desai, and Talukdar (2006), and Kim and Jensen (2014). At the core of signaling theory are signals that contain positive and/or negative information which is conveyed to the receivers: signals must be credible to attract a receiver's attention and receivers stand to gain from making decisions based on the information contained in credible signals.…”

Section: China's Film Industrymentioning

confidence: 99%

Behind film performance in China’s changing institutional context: The impact of signals

et al. 2017

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Grounded in signaling theory, this paper investigates the signals reflecting product quality, innovativeness, reputation and cultural background which influence film performance, that is, film survival (duration on cinema screen) and box office success, in China's changing institutional context. This market has grown substantially and still possesses potential for further development. However, China's unique institutional context presents challenges. By examining an expanded range of potential signals, two of which have not previously been examined in the literature, namely imported films and enhanced format film formats such as 3D and IMAX, we develop a conceptual framework and argue that signaling theory needs to be combined with institutional context. Similar to findings for film industries in other countries, we find quality and reputational signals including budget, star power, sequels, and online Asia Pac J Manag (2018) 35:63-95

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Section: Hong Kong Investor Perceptions Of Government Ownershipmentioning

confidence: 99%

“…The institutional voids in China generate difficulty for investors to evaluate firms listed in such markets (Wu, Li, & Li, 2013). Thus, investors tend to rely on signals, such as firms' political connections to evaluate firms (Peng, 2004;Wu et al, 2013). For instance, in Southeast Asia, political connections, instead of fundamentals such as productivity, are the primary determinants of investors' investment decisions (Fisman, 2001).…”

Section: Hong Kong Investor Perceptions Of Government Ownershipmentioning

confidence: 99%

How Ideologies Influence the Legitimacy of State Involvement in Corporate Governance

Shao

2016

AMPROC

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The contingent value of CEO political connections: A study on IPO performance in China

Cited by 80 publications

References 85 publications

Does Political Capital Create Value in the IPO Market? Evidence from China

Does Political Capital Create Value in the IPO Market? Evidence from China

Behind film performance in China’s changing institutional context: The impact of signals

How Ideologies Influence the Legitimacy of State Involvement in Corporate Governance

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