Partial private sector oversight in China's A-share IPO market: An empirical study of the sponsorship system

TY - JOUR

T1 - Partial private sector oversight in China's A-share IPO market: An empirical study of the sponsorship system

AU - Hoque, Hafiz Al Asad Bin

AU - Mu, Shaolong

N1 - © 2019 Elsevier B.V. This is an author-produced version of the published paper. Uploaded in accordance with the publisher’s self-archiving policy.

PY - 2019/6/1

Y1 - 2019/6/1

N2 - The Chinese IPO market has introduced the private oversight of sponsors under tight government control. We examine the performance of IPOs that are managed under private sector oversight, known as the sponsorship system. Using buy-and-hold returns, operating performance measures, Fama-French five factor models, propensity score matching, and triple DiD (DDD), we find thatlong-term performance is better under the sponsorship system. Additionally, we find that IPOs with reputable sponsor institutions and reputable sponsor representatives perform better. Relatedly, the CSRC takes less time to review the admission documents prepared by reputable sponsor institutions. Regulatory action taken by the CSRC is shown to be effective, as the number of IPO businesses declines for sanctioned sponsor institutions, and the IPOs managed by them perform better once they have received a penalty.

AB - The Chinese IPO market has introduced the private oversight of sponsors under tight government control. We examine the performance of IPOs that are managed under private sector oversight, known as the sponsorship system. Using buy-and-hold returns, operating performance measures, Fama-French five factor models, propensity score matching, and triple DiD (DDD), we find thatlong-term performance is better under the sponsorship system. Additionally, we find that IPOs with reputable sponsor institutions and reputable sponsor representatives perform better. Relatedly, the CSRC takes less time to review the admission documents prepared by reputable sponsor institutions. Regulatory action taken by the CSRC is shown to be effective, as the number of IPO businesses declines for sanctioned sponsor institutions, and the IPOs managed by them perform better once they have received a penalty.

KW - Buy-and-hold return

KW - CSRC

KW - Fama-French five factor model

KW - IPOs

KW - Private sector oversight

KW - Sponsorship system

UR - http://www.scopus.com/inward/record.url?scp=85059749279&partnerID=8YFLogxK

U2 - 10.1016/j.jcorpfin.2019.01.002

DO - 10.1016/j.jcorpfin.2019.01.002

M3 - Article

SN - 0929-1199

VL - 56

SP - 15

EP - 37

JO - Journal of corporate finance

JF - Journal of corporate finance

ER -