Institutional Environment and IPO Strategy: A Study of ChiNext in China

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2017-05-08
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Zhang, Jing
Zhang, Wei
Zhang, Sipei
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Schwab, Andreas
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Management and Entrepreneurship

The Department of Management and Entrepreneurship seeks to provide students with the knowledge of organizations and management functions within organizations. Graduates will be able to understand work-related behavior, competitive strategy and advantage, strategies of international business, and human-resource management practices.

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The Department of Management was formed in 1984 in the College of Business Administration (later College of Business).

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1984 - present

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Taking an institution-based view, we investigate how entrepreneurs respond to immature regulatory environments in order to be listed on stock markets in countries with an emerging economy. Unlike stock markets in developed countries, in emerging markets, gaining government approval for listing is a critical and more unpredictable process for entrepreneurs. Hence, entrepreneurs who are preparing for a public offering might give substantially discounted shares to venture capital (VC) investors. This will lead to higher investment returns in pre-IPO deals than those at earlier stages, which distorts the risk-return tradeoff found in developed markets. In particular, the VC investors affiliated with powerful organizations that can promise entrepreneurs preferential access to stock market gatekeepers will gain even higher pre-IPO investment returns. The associated additional institutional rents earned by VC investors, however, are expected to decrease over time, as the stock markets mature. Related hypotheses with regard to the investment timing, VC firm affiliations with government agencies, securities traders, and universities are tested using data from ChiNext in China (2009–2013). This study highlights that institutional factors impact the behavior of participants in emerging markets. It extends current theories derived almost exclusively from developed markets.

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This article is from Management and Organization Review; 2017, 13(2); 399-430. DOI: 10.1017/mor.2016.40. Posted with permission.

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Sun Jan 01 00:00:00 UTC 2017
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