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The role of private equity when portfolio firms go public: Evidence from ChiNext board

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journal contribution
posted on 31.10.2018 by Yao Li, Mike Wright, Louise Scholes, Ziwei Zhang
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.

Funding

Yao Li acknowledges the financial support of National Social Science Fund of China (13BJL038).

History

School

  • Loughborough University London

Published in

Emerging Markets Finance and Trade

Volume

55

Issue

12

Pages

2851 - 2870

Citation

LI, Y. ... et al, 2018. The role of private equity when portfolio firms go public: Evidence from ChiNext board. Emerging Markets Finance and Trade, 55 (12), pp.2851-2870.

Publisher

© Taylor & Francis

Version

AM (Accepted Manuscript)

Publisher statement

This is an Accepted Manuscript of an article published by Taylor & Francis in Emerging Markets Finance and Trade on 20 November 2018, available online: http://www.tandfonline.com/10.1080/1540496X.2018.1536607.

Acceptance date

08/10/2018

Publication date

2018-11-20

ISSN

1540-496X

eISSN

1558-0938

Language

en

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