Last Minute Deals: Rent Seeking in IPO Market

Research output: Working paperPreprint

18 Downloads (Pure)

Abstract

This paper explores rent-seeking behavior in a heavily regulated equity-financing market. Using manually-collected information about ownership changes from China’s IPO application filings for the Growth Enterprise Market (GEM), we find that over a third of firms receive late-stage private equity investment and subsequently halve rejection rates for IPO applications, compared to firms without PE investment. The PE investors help firms pass the regulatory barriers, especially for those with weaker quality, and are rewarded with 9.5 times return over a 14-month period for an average deal. We also examine alternative explanations for extraordinary PE returns, such as financing, selection/certification, and managerial involvement, and find rent-seeking is the most coherent explanation to our findings.
Original languageEnglish
PublisherSSRN
Number of pages44
DOIs
Publication statusPublished - Apr 2015

Source

Available at SSRN: https://ssrn.com/abstract=2597452 or http://dx.doi.org/10.2139/ssrn.2597452

Keywords

  • Rent seeking
  • Private equity
  • Initial public offering

Fingerprint

Dive into the research topics of 'Last Minute Deals: Rent Seeking in IPO Market'. Together they form a unique fingerprint.

Cite this