City-level political uncertainty and city-level IPO activities

Abstract

© 2018 AFAANZ Based on the unique city-level politician turnover data between 1999 and 2012 in China, we document that the number of IPOs at the city level decreases during the city-level politician turnover period. Such negative shock is more pronounced for non-state-owned enterprises (NSOEs) than for SOEs and more pronounced for local SOEs than for central SOEs. Higher political uncertainties amplify the negative shock when the successor politician is nonlocal, when turnover occurs during periods of higher local fiscal deficits or during party member election periods, and when government interventions are higher or confidence-in-court is lower. Consequently, IPO firms listed during a political turnover period underperform their counterparts.