The life cycle of initial public offering companies in China

Liu, JL; Li, D

Abstract

Purpose – The purpose of this paper is to identify the extent to which the company’s
post- initial public offering (IPO) outcome varies, along with the determinants of the post-IPO
outcomes.
Design/methodology/approach – The authors use Cox proportional hazards models to examine
what determines the company’s post-IPO transition to one of the classified outcomes, delisting,
acquisition due to strong performance, and acquisition due to weak performance. The authors
develop models taking in a range of information concerning pre-IPO characteristics, offering
characteristics, financial indicators, company specifics, industry features, and corporate ownership
and governance.
Findings – Delisting is predominantly influenced by the company’ pre-IPO operating performance,
as well as financial indicators and governance structure at the time of the IPO. Sound governance
structure and good financial standing of the company aid it to achieve its goal. Mergers and
acquisitions (M&As) of both forms are distinguished most significantly by ownership structure and
industry features, which is consonant with the position that M&As are majorly motivated by social
concerns and corporate control considerations. Centrally, corporate evolution is jointly shaped by
market force and state control.
Practical implications – The findings can inform public policy decisions. There is a case for
gradual introduction of institutional changes which facilitate, regulate, and monitor orderly market
operations in line with the market mechanism and sound corporate governance.
Originality/value – The study is among the first efforts to examine what determines the company’s
transition to one of the post-IPO states following the IPO in China’s stock market.
Keywords China, Mergers and acquisitions, Listing, IPO, Corporate ownership and governance,
Cox hazard function, Delisting, Agency costs
Paper type Research paper

• Journal Article Type: Article
• Publication Date: Nov 4, 2014
• Deposit Date: Jan 29, 2015
• Publicly Available Date: Jan 1, 2017
• Journal: Journal of Applied Accounting Research
• Print ISSN: 0967-5426
• Publisher: Emerald
• Peer Reviewed: Peer Reviewed
• Volume: 15
• Issue: 3
• Pages: 291-307
• DOI: https://doi.org/10.1108/JAAR-12-2013-0111
• Publisher URL: http://dx.doi.org/10.1108/JAAR-12-2013-0111
• Related Public URLs: http://www.emeraldinsight.com/loi/jaar
• Additional Information: Funders : Funder not known