Does political capital create value in the IPO market? Evidence from China

Qigui Liu, Jinghua Tang, Gary Gang Tian*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

105 Citations (Scopus)


This study examines the value of political capital in the Chinese IPO market. We find a positive relationship between a politically connected executive and the probability of IPO approval of entrepreneurial firms. We further identify that shareholders value those connections and give a market premium to connected firms after the firms go public. We provide evidence that other types of political capital gained through external sources, such as politically connected sponsors and PE investors, also bring benefits to the firms in their IPO approval, and these connections substitute for the effect of the executive's political connections on IPO approval. We argue that in emerging markets where government intervention is still prevalent, political capital does create value and entrepreneurial firms usually build political capital to facilitate their access to the IPO market, although other types of political capital do not bring further benefits into the post-IPO market.

Original languageEnglish
Pages (from-to)395-413
Number of pages19
JournalJournal of Corporate Finance
Publication statusPublished - Dec 2013
Externally publishedYes


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