European Business Schools Librarian's Group

HEC Research Papers Series,
HEC Paris

No 1183: The Unintended Consequences of Government Regulations in Emerging Financial Markets: Evidence from the Chinese IPO Market

François Derrien (), Xiaohui Wu (), Qi Zeng () and Yan Zhang ()

Abstract: This paper explores the impact of regulations imposed by the Chinese government on the development of the Chinese IPO market between 2000 and 2011. Some of these regulations have affected the population of Chinese firms that went public domestically, some firms being excluding from the domestic IPO markets, others being induced to list abroad. We also provide evidence that, because of limits on prices and proceeds, the Chinese IPO market does not attract companies that need cash the most. Some IPO firms that raise large amounts of cash decide to pay large dividends shortly after going public, which investors interpret as evidence that their growth options were overestimated at the time of their IPO.

Keywords: Regulation; Emerging markets; Initial Public Offerings

JEL-codes: G28; G30; G38

45 pages, First version: December 1, 2016. Revised: December 22, 2016.

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