The Unintended Consequences of Government Regulations in Emerging Financial Markets: Evidence from the Chinese IPO Market

Frannois Derrien , Xiaohui Wu (1) , Qi Zeng (2) , Yan Zhang (3)

1 HUST - Huazhong University of Science and Technology [Wuhan]
2 BROAD INSTITUTE - Broad Institute of MIT and Harvard
3 Qiongzhou University

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.

Mots clés: Regulation; Emerging markets; Initial Public Offerings

Domaines: Gestion et management

Frannois Derrien, Xiaohui Wu, Qi Zeng, Yan Zhang. The Unintended Consequences of Government Regulations in Emerging Financial Markets: Evidence from the Chinese IPO Market. 2016. ⟨hal-01970752⟩