2134/35614
Yao Li
Yao
Li
Mike Wright
Mike
Wright
Louise Scholes
Louise
Scholes
Ziwei Zhang
Ziwei
Zhang
The role of private equity when portfolio firms go public: Evidence from ChiNext board
Loughborough University
2018
Private equity
ChiNext
IPO underpricing
Reputation
2018-10-31 08:49:29
Journal contribution
https://repository.lboro.ac.uk/articles/journal_contribution/The_role_of_private_equity_when_portfolio_firms_go_public_Evidence_from_ChiNext_board/9464858
We probe into the question of why entrepreneurial firms choose to obtain private equity finance (PE) shortly before going public on the ChiNext Board (the Chinese alternative stock market for smaller firms, part of the Shenzhen Stock Exchange, SZSE). Using unique hand-collected data we find that, compared with non-PE-backed firms, firms with PE equity stakes introduced shortly before the IPO did not reduce IPO underpricing or decrease the offering cost. However PE investors increased the probability of approval when the firms applied to the China Securities Regulatory Commission (CSRC) for listing. We suggest the stock issuance rules for the ChiNext should be reformed to lower entrepreneurial firms’ financing cost and to encourage PE firms to undertake more value-adding activities.