Policy Uncertainty and Innovation: Evidence from IPO Interventions in China / Lin William Cong, Sabrina T. Howell.

Format:

Book

Author/Creator:

Cong, Lin William.

Contributor:

National Bureau of Economic Research.

Howell, Sabrina T.

Series:

Working Paper Series (National Bureau of Economic Research) no. w24657.

NBER working paper series no. w24657

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2018.

Summary:

Public equity is an important source of risk capital, especially in China. The Chinese government has occasionally suspended IPOs, exposing firms already approved to IPO to indeterminate listing delays. The temporary bar on going public increases uncertainty about access to public markets for affected firms. We show that suspension-induced delay reduces corporate innovation activity both during the delay and for years after listing. Negative effects on tangible investment and positive effects on leverage are temporary, consistent with financial constraints during the suspensions being resolved after listing. Our results suggest that predictable, well-functioning IPO markets are important for firm value creation. They demonstrate that corporate innovation is cumulative and is negatively affected by policy uncertainty.

Notes:

Print version record

May 2018.