Since 2004, China’s A-share stock market has begun to implement the sponsorship system, which is characterized by " double sponsorship”. In addition to the sponsor institution, it also sets up the position of sponsor representatives, who perform the underwriting sponsorship on behalf of the sponsor institution, taking the responsibility and risks individually. In the reviewing process of the Issuance Appraisal Committee, sponsor representatives frequently attend the meeting of the Issuance Appraisal Committee and interact closely with the regulatory authorities, which play an important role in the company’s IPO passing rate. However, looking at the existing literature, few studies have examined the relationship between sponsor representatives’ project experience and the IPO passing rate. Does sponsor representatives’ project experience affect the IPO passing rate? What is the impact mechanism behind it? Taking companies applying for listing in 2007—2015 as samples, this paper examines the impact of sponsor representatives’ project experience on the IPO passing rate. Our research finds that sponsor representatives’ project experience helps to improve the IPO passing rate of applying companies, and this promotion is more obvious in companies sponsored by less-reputed securities companies, private companies and companies with complex business. Further analyses show that the impact of sponsor representatives’ project experience on the IPO passing rate is mainly caused by reducing the information asymmetry between issuers and the Issuance Appraisal Committee and improving the compliance of applying companies. Finally, from the perspective of economic consequences, the company sponsored by the project’s experienced representatives has higher stock returns and better operating performance, which indicates that sponsor representatives’ project experience has improved the IPO approval rate of listed companies and the efficiency of resource allocation in the capital market. The contributions of this paper are as follows: First, this paper analyzes the IPO reviewing of companies from the perspective of sponsor representatives’ project experience, broadens the understanding of representatives’ role in the IPO reviewing, which is complementary to the existing literature. Second, although there have been many studies examining the factors affecting the passing rate of applying companies, there has not been any in-depth analysis of the role of representatives. We pay attention to the impact of sponsor representatives’ project experience on the IPO reviewing, and further explore the mechanism behind its impact from an empirical perspective for the first time. Third, the research in this paper shows that sponsor representatives’ project experience can improve the company’s passing rate and have a positive impact on the company’s performance after listing. This finding helps to deepen the understanding of China’s current stock review system, and provide policy recommendations for the optimal allocation of China’s capital market resources. Fourth, this paper theoretically enriches the information asymmetry theory in the IPO process under the Chinese institutional background. The information asymmetry in the context of China’s sponsorship system is mainly reflected in the information difference between issuers and the Issuance Appraisal Committee. The research theoretically points out that sponsor representatives’ project experience can cope with the special information asymmetry in the Chinese institutional environment and provide a new perspective for the study of IPO issues.
Sponsor Representatives’ Project Experience，IPO Passing Rate and the Efficiency of Resource Allocation
Journal of Finance and Economics Vol. 45, Issue 11, pp. 70 - 82 (2019) DOI:10.16538/j.cnki.jfe.2019.11.006
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Cite this article
Li Ting, Zhao Yu, Wei Haoqiang, et al. Sponsor Representatives’ Project Experience，IPO Passing Rate and the Efficiency of Resource Allocation[J]. Journal of Finance and Economics, 2019, 45(11): 70-82.